PG&E Corporation (PCG) shares rose more than 6.3% on Tuesday after California issued a proposal to address the impact of natural disasters and climate change following the recent wildfires. Among other things, the proposal aims to update liability rules and regulations for utility services in light of these types of events, which could reduce liabilities faced by these companies following natural disasters and climate change.
Last month, Standard & Poor's downgraded PG&E to BBB+ from A- and kept the rating on negative watch following the "considerable risk" from the wildfires in its service area. The credit analyst no longer believes that the company's risk management policies are consistent with its prior ratings. These same issues have plagued other companies such as Edison International (EIX) that have exposure to the area's risks. (See also: Prepare Now for the Next Financial Storm.)
From a technical standpoint, PG&E stock has been trending higher since mid-February following a significant decline over the past several months. The breakout from the 50-day moving average and pivot point could mark a turning point for the stock. The relative strength index (RSI) appears a bit overbought at 67.02, but the moving average convergence divergence (MACD) continues to see a strong bullish trend toward its zero line.
Traders should watch for a breakout from the 50-day moving average and pivot point at around $42.00 to R2 resistance at around $51.50 over the coming sessions. With the lofty RSI reading, traders could see some consolidation above these support levels before a significant move higher. A breakdown back below these support levels could lead to a move down to retest prior lows near S1 support at $36.59, but that scenario appears less likely now. (For more, see: PG&E Reports Results for the Quarter Ended Dec. 31 – Summary.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.