Shares of Southern Co. (SO) -- a Dividend Stock Advisor holding -- have rallied nicely from an early September low, but our indicators suggest that SO may not have the power to break out over its early 2015 zenith around $53.
In this daily chart of SO, above, we can see that it has taken seven months of rallies and corrections for prices to come back up to around its 2015 peak. Volume did not begin to increase with the uptrend until early this year. The On-Balance-Volume (OBV) line moved up from a November low, but has been trending sideways since early February. Prices made new highs for the move up in March, but the OBV line did not make a corresponding new high.
Prices are above the rising 50-day and 200-day moving average lines, but a pullback in prices this month has put the 50-day line within striking distance. In March, there was a small bearish divergence between prices rising and the price momentum study weakening. Momentum is a leading indicator and does not produce clear buy and sell signals.
In this weekly chart of SO, above, we can see a "horseshoe-like pattern" to the price action last year. Prices peaked around $53 and declined to a $42 low before mounting a return to just below the earlier crest. Like our daily chart, the OBV line on a weekly time frame has not broken above its prior high. Volume should confirm the price strength. SO is above its rising 40-week moving average line, but without a stronger volume picture we don't get enough encouragement that new highs can be established.
Don't get me wrong. SO hasn't done anything wrong on the chart, but existing longs should reconsider their positions if we see SO close below $48.