Shares of the stock have been basing for the past four months in preparation for an eventual upside move, our charts and indicators suggest.
FE is getting ready for an upside recovery with a bullish divergence between lower lows in price in September and November, but higher lows with the momentum study at the bottom of this chart, above. Looking at the 50-day and 200-day moving averages, we can see they have flattened out and it won't take much of a rally to generate buy signals when prices rally above the averages. The On-Balance-Volume (OBV) line has been mirroring the price action and is not foreshadowing weakness ahead.
Like our short-term chart, this longer-term view of FE (above) also supports the idea of an upside move. Volume has been heavier the past three to four months, but prices have not moved significantly lower, suggesting that selling is being met with equally aggressive buying. The OBV line is neutral, while the lower lows in price are not being met with lower lows in our momentum study. This is known as a bullish divergence and is considered a leading indicator.
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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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