Oil Stocks- IBD 50 Stocks To Watch: Oil Stock Triggers 8% Sell Rule After A 159% Surge; Should You Buy The Dip?
Among leading growth stocks, our pick for today’s IBD 50 Stocks To Watch is Callon Petroleum (CPE), which has recently pulled back following a 159% year-to-date surge.
Callon Petroleum had been holding near recent highs after reporting first-quarter 2021 earnings that beat estimates on May 5.
However, shares reversed badly off new 52-week highs this week amid a sell-off in the oil and gas industry group. After briefly trading above the latest buy point of 42.08 in its sloppy cup with handle on May 10, Callon fell back below this entry and triggered the 7%-8% loss sell rule.
At this point, investors will want to watch for support at the 10-week line and potentially wait for a new base to form.
Amid the recent carnage, the stock still features a strong IBD Composite Rating of 96, alongside a perfect 99 Relative Strength Rating and an acceleration in bottom line growth on a year-over-year basis. However, keep in mind that the RS Rating covers 12 months’ worth of action; it’s less sensitive to action over the past several weeks.
The Houston-based company currently ranks No. 2 among companies in its industry group in terms of Composite Rating.
Callon Petroleum is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading shale oil plays of South and West Texas.
Callon Petroleum Earnings
The firm posted a Q1 sales increase of 24% to $360 million, beating Wall Street’s expectations. Meanwhile, EPS growth went from a 56% decline to a 24% increase in the past two quarters. The company’s latest top and bottom line increases meet the minimum of 20%-25% that IBD’s CAN SLIM strategy looks for in leading growth stocks.
Earnings of $1.49 a share for the first quarter jumped 24% and exceeded the FactSet consensus estimate among analysts.
A major win for the growth stock this quarter was continuing to generate positive free cash flow. This occurred despite extreme winter weather significantly impacting production. “The first quarter showcased our team’s highly efficient resource development model and operating cost management, underpinned by consistent well performance from our multizone, life of field development program,” said Joe Gatto, CEO of Callon Petroleum in a recent news release.
Analysts expect the firm’s second-quarter earnings and sales to show triple- and quadruple-digit year-over-year growth. According to IBD data, earnings are expected to climb 1,370% to $1.47 a share and revenue to jump 106% to $323 million.
Growth Stocks Nearing Buy Points
Shares closed sharply below the 50-day line on Thursday after falling nearly 9%. The stock’s relative strength line has also been trending lower in recent days after a period of drifting sideways. Ideally, the RS line will be at or near new highs as the stock breaks out.
While Callon should definitely be added to your watchlist, investors should wait to pull the trigger until the stock reclaims its 10-week moving average — preferably in heavy turnover — or if it breaks out from a new buy point.
Follow Fox on Twitter at @foxonstocks for more analysis on other growth stocks.
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