Trade Recommendation: Buy Bottoming FE and GE

The S&P 500 Index (SPX) maintains its bullish tone by opening at 2,685.92 yesterday which is 10 points higher than the previous day’s close. It went to a high of 2,694.97 before closing at 2,690.16. The index continues to climb, but technical indicators are starting to show signs that profit taking might commence soon. The index remains in overbought territory. Plus, RSI is knocking on immediate resistance at 76. A dip is in order to keep the ascent sustainable.

Whether we see profit taking in the next few days, the index is still controlled by bulls. Let’s look at stocks flashing signs that their downtrend is over.

FE – FirstEnergy Corporation

FirstEnergy Corporation is an energy company with over six million customers in Ohio, Pennsylvania, West Virginia, Maryland, and New Jersey. The company is one of the country’s largest investor-owned utility.

To say that FE investors have had a bad decade would be an understatement. The stock lost 66.75% of its value from a high of 84 in 2008 to a low of 27.93 in May this year. The worst may be behind for investors, as the stock appears to have bottomed out.

Technical analysis reveal that the stock continues to respect support at 29. That support level has stood the test of time as FE has been using it to stabilize its price since 2002. Moreover, the weekly chart reveals a throwback after the stock hit resistance at 34. This might be the final pullback before FE finally reverses its trend.

The strategy is to buy as close to support at 30 or wait for breakout at 34 with volume of 9 million in the daily chart. Once the stock breaches 34, we have a minimum target of 40. Break 40 and we get to 52.

Weekly FE Chart

Monthly FE Chart

As of December 18, 2017, the FirstEnergy Corporation stock closed at 31.51.

Summary of Strategy

Buy: close to 30 or breakout at 34 with 9 million in volume

Support: 30 and 29

Target: 40 and 52

Stop: A close below 29 negates this trade call.

GE – General Electric Company

General Electric Company is a multinational conglomerate with presence in multiple industries including aviation, energy, lighting, healthcare, transportation, pharmaceutical, software development, and many others. Its stock has been in a downtrend since 2016 when it generated a massive bearish structure above 30. It lost 45.63% of its value as it nosedived to 17.46 from a high of 33. However, recent price action shows that the stock has probably bottomed out.

Weekly chart show massive selling volume on the week of November 13th, 2017. Since then, the volume has significantly decreased week after week while the stock stabilizes at 17, which is a support level that has not been breached since 2012. In addition, the stock is in extreme oversold territory and RSI shows signs of stability. All in all, we have enough evidence to suggest a bottom.

The strategy is to buy above 17 and trade the consolidation period. The initial target is 20 and the maximum target is 24.

Take note: the stock is still in a downtrend. However, there’s an opportunity to make money by riding the rally.

Weekly GE Chart

Monthly GE Chart

As of December 18, 2017, the General Electric Company stock closed at 17.71.

Summary of Strategy

Buy: above 17

Support: 17

Target: 20 and 24

Stop: A close below 17 negates this trade call.

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.