Shares of FirstEnergy (FE) have been in a relentless decline for much of this year, but in the past three months a turnaround has been underway.
In this daily chart of FE, above, we can see the beneath-the-surface improvement in the technical condition of FE. Though prices have made lower lows, we can see a bullish divergence between the price action and the momentum study making higher lows from September to November. Prices have rallied above the 50-day moving average and the slope of the moving average is now positive. The rally has almost reached the 200-day average. The On-Balance-Volume (OBV) line has improved in November, signaling fresh accumulation.
This second chart, above, is a weekly view of FE. The chart shows that the downtrend has been in force for nearly three years, but we are near the declining 40-week moving average. The OBV line is neutral and the trend-following Moving Average Convergence Divergence (MACD) oscillator is crossing to a "cover shorts" signal. While this may not sound like a table-pounding recommendation, FE may surprise on the upside with a rally that carries into the new year. Our first upside price objective is $36.
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Valero Energy's dividend has not been cut, despite hard times. There is the possibility for outsized returns from a quicker than anticipated bounce back in demand, but clear risk remains.
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