Shares of energy trader Dynegy Inc. rallied more than 14 percent on Tuesday, recouping Monday's steep losses, on investor hopes that the worst of its Enron headache is over, but analysts said a drawn-out legal tussle with its former takeover target could mean fluctuation in its stock price for some time to come.

On Monday Dynegy held a conference call with analysts, reassuring them that, notwithstanding its dealings with bankrupt Enron Corp., the company's fundamentals remain strong.

"They laid out a very strong case," said William Maze, an analyst with Banc of America Securities. "I think that there may be a sentiment out there that the worst is behind us."

Dynegy's stock closed up $3.98, or 14.65 percent, at $31.15 on the New York Stock Exchange.

The Houston-based power trader, which last week backed out of an agreement to buy Enron, on Sunday was slapped with a $10 billion lawsuit by Enron alleging breach of contract and wrongful termination of the merger deal. The suit was filed in conjunction with Houston-based Enron's Chapter 11 bankruptcy filing.

Dynegy filed a countersuit on Monday seeking to protect its option to buy Enron's Northern Natural Gas Pipeline.

Dynegy shares tumbled 10.5 percent to $27.17 on Monday amid investor worry about a costly legal battle with Enron. Shares of Dynegy, which have declined steadily since the Nov. 9 merger announcement, had not traded that low since March 2000.

Despite Tuesday's gains, analysts stressed that the Enron struggle is not over and that Dynegy's stock will remain volatile.

Maze of Banc of America Securities said, "It is unpredictable ... there is potential for as many upside catalysts as downside."

Mike Barbis, an analyst with Fulcrum Global Partners LLC, said, "I think this issue will come back and forth. It has gone away today but could come back again in a week or a month."

Shares of Enron more than doubled on Tuesday, trading as high as 95 cents for the first time since last Wednesday. After the stock market close on Monday, Enron said it had secured $1.5 billion in debtor-in-possession financing. Also, there was speculation that the company could be bought by a small privately-held Illinois utility, Standard Power & Light, which acquires and develops independent power plants.

"There is speculation that they may be able to come out of bankruptcy," Maze said. "It's tempting for some people to be speculating on the stock."