Many Utilities are Showing Strength

• Posted by Greg Harmon
• on January 19th, 2016

Utilities showing strength is a defensive investment move. Or so the story goes. Whether you believe that or not it is happening right now. I wrote about Southern Company ($SO) earlier today as an example. Another that is looking good is American Electric Power ($AEP). The chart below shows the price action in American Electric Power since September 2013, when it made a short term bottom.

Since then it rose to a peak in early 2015 and then started a 12 month rounded pullback. At the bottom it had retraced about 56% of the leg higher form September 2013. Now it is making higher lows against the resistance at 59.60. This sets up for a possible entry into the stock. The full rise and rounded pullback creates an AB=CD pattern that targets a move to about 75.70.

The trigger to participate in this move is a break of that resistance at 59.60. The last higher low at 57.50 makes for a natural level for a stop loss on the trade and only risks about $2 against a possible reward of $18. But it is even better than that. The stock pays a 3.8% dividend ($2.24 annually), to get you comfortable with waiting. Watch for earnings are coming up on January 28th

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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