Oil stock Callon Petroleum is near the buy point of a new base as this IBD 50 Stocks to Watch pick rallies from a pullback that started in mid-April.
Sales and profits of the Houston-based oil and gas explorer have been explosive the past year. That's due in large part to energy prices rising to historically high levels amid shortages tied to the Russian attack on Ukraine and other factors.
West Texas intermediate front month oil futures traded at $116.10 a barrel on the Nymex on Wednesday, up more than 1% on the day and up 69% from $68.83 a year ago, according to The Wall Street Journal Markets.
Oil Stock's Rapid Earnings Growth
Callon's earnings per share have jumped 2,880%, 358%, 166% and 130% in the past four quarters, according to MarketSmith. Sales have soared 180%, 91%, 134% and 116% in those same periods
Analysts predict EPS of this hot oil stock will rise 181% in the second quarter and 90% for the full year.
CPE stock has an EPS Rating of 89, according to Stock Checkup. EPS growth has averaged 218% in the past three quarters. But EPS growth has declined an average 2% in the past three years. A 63% drop in 2020 EPS has weighed on Callon's EPS Rating.
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Callon's Sock Performance
Callon's stock is nearing the 66.58 buy point of a cup base, according to MarketSmith pattern recognition. The base started when the oil stock peaked at 66.48 on April 4. By May 12 shares had sunk to a low of 42.22, diving below their 50-day moving average and 200-day moving average along the way.
But the oil stock has since rallied and has been building the right side of the cup base.
A bullish sign can be seen in Callon's relative strength line reaching a new high as it nears a buy point of the base. That's earned the oil stock an RS Line Blue Dot, as seen in its MarketSmith chart. The RS Line Blue Dot helps in pinpointing stocks poised for strong, sustainable advances.
Callon's stock is now about 7% below the entry. Look for the stock to break above the buy point in large volume. Alternatively, watch to see if the oil stock drifts sideways or a bit lower in the next week or so, that could transform the base into a cup with handle and offer an earlier entry point.
As of March 31, Callon had 1,344 gross (1,204.3 net) wells producing from established flow units in the Permian and Eagle Ford areas of Texas, according to Callon's Q1 earnings release. Net daily production for the three months ended March 31 was 102.7 MBoe/d (63% oil). MBoe/d stands for thousands of barrels of oil equivalent per day.
