The Florida-based electric services company, NextEra Energy Inc. (NYSE: NEE) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Uptrend Channel: The daily chart of NEE shows that the stock has been trading within an uptrend channel for the past several months. This channel is marked in purple color. Currently, the stock is trading near the middle of this channel, which indicates that the stock has gained momentum and has the potential to move up.
Daily Chart – NEE
#2 IH&S Breakout in Daily chart: As you can see from the daily chart, the stock has recently broken out of an Inverted Head and Shoulders (IH&S) pattern within the trend channel. This is marked in orange color. An IH&S pattern is a strong bullish pattern and indicates that the stock may move higher in the short term.
#3 Above MAs: The stock is currently trading above both 50-day and 200-day SMA, indicating the overall bullishness of the stock.
#4 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#5 Strong RSI: RSI is currently above 50, indicating strength.
#6 Strong Support Level: There is a strong support level close by for the stock.
This is marked as a pink dotted line.
This level is the breakout level of the IH&S pattern and looks like a good area for the stock to bounce back after this correction.
#7 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating briefly. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in pink color in the weekly chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. The stock has currently broken out of the flag pattern, which is a bullish sign.
Weekly Chart – NEE
#8 %K above %D: The stochastics show that the %K line is currently above the %D line in the weekly chart. This is a bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase shares of NEE at the current price of $176.82.
TP: Our target prices are $185 and $200.
SL: To limit risk, place a stop loss at $173.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 5% to 13% in the next 3-6 months.
For a risk of $3.42, our target rewards are $8.18 and $23.18. This is almost 1:2 and 1:7 risk-reward trade.
In other words, this trade offers nearly 2x to 7x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the Inverted Head and Shoulders pattern and trend channel support. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara