Shares of power company AES Corp. ( AES) were upgraded Monday by Thestreet.com's quantitative service, following the company's recent quarterly earnings beat. Let's also check the charts of AES to combine two and three major investment approaches (fundamentals is the third leg of the stool).
In this daily bar chart of AES, below, we can see a wide-swinging sideways move the past 12 months. Dips down to the $19 area have been bought while rallies up to the $26-$28 area have failed. In the latest rally of AES we have pushed prices back above the rising 50-day moving average line and the rising 200-day moving average line. The On-Balance-Volume (OBV) line shows us a decline to the middle of October telling us that sellers of AES were more aggressive than buyers. From October we are seeing the beginning of a shift to more aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator has moved back above the zero-line for a new outright-buy signal.
In this weekly Japanese candlestick chart of AES, below, we can see a large upper level base pattern. Prices appear to have made an inverse head-and-shoulders pattern, which is playing out as a continuation pattern (this is discussed in my book on chart patterns). Prices are above the rising 40-week moving average line. The weekly OBV line shows a low back in February. The MACD oscillator is in a bullish alignment above the zero-line.
In this daily Point and Figure chart of AES, below, we can see a potential price target in the $33 area.
In this second Point and Figure chart of AES, below, we used weekly price data. Here we see a target in the $44 area.
Bottom line strategy: A quantitative upgrade and bullish charts sound like a good combination to me. Traders could go long AES at current levels risking to $23. $33 and then $44 are our price targets.
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The shares are down sharply after the retailer reported its latest earnings.
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