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For today's chart we've chosen to take a look at American Electric Power Co (NYSE:AEP) because it recently dropped below several short-term areas of support. As you can see from the chart below, the bears sent the price below the neckline of a head and shoulders pattern in late May and the stock has dropped sharply since. Notice how the move below the neckline also corresponded with a break below a eight-month trendline. This move below the trendline will likely cause many bearish traders to revise their targets from $46.33, which was breeched today, to the longer-term trendline that is currently trading near $44.

It is important to realize that the uptrend is still valid and that the bulls will likely be looking to step in as the price nears the lower trendline. Many traders will choose to confirm the nearby support by using other indicators such as the Relative Strength Index because the value of this indicator is already below 30, which suggests that the correction may be getting oversold. We believe there is still some downside remaining in this stock, which is why we'll wait for the RSI to cross above 30 before turning bullish.


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