FirstEnergy Corp. (FE) shares have risen more than 25% since the beginning of the year – roughly 18% more than the 7.8% increase in the Utilities Select Sector SPDR (XLU) over the same time frame. The company also increased its dividend by 5.6% to 38 cents per share in November, which represented a forward yield of about 4% at the time.

The company has been restricting its business and transitioning to a fully regulated utility over the past year. During the second half of the year, the company announced a new organizational structure, and FirstEnergy Solutions (FES) – its bankrupt subsidiary in Ohio – secured a bankruptcy court-approved settlement. These developments could accelerate its turnaround.

Over the long term, the company plans to invest $4.7 billion by 2021 to generate an 11% compound annual growth rate at its three formula rate transmission companies. More than 80% of its investment is recoverable through formula rate mechanisms, which significantly reduces execution risk. 

Technical chart showing the performance of FirstEnergy Corp. (FE) stock

From a technical standpoint, the stock has been trading within a well-established price channel for about a year. The relative strength index (RSI) stands at a neutral 43.64, but the moving average convergence divergence (MACD) experienced a bearish crossover that could signal downside ahead. These indicators suggest that stock could see some near-term volatility.

Traders should watch for a breakdown from trendline support, which could lead to a significant downturn toward S1 support at $36.21, the 200-day moving average at $35.39 or S2 support at $34.60. If the stock rebounds from the support levels, traders could see a move toward the upper end of the price channel at about $40.00 over the coming sessions.

The author holds no position in the stock(s) mentioned except through passively managed index funds.