AES Corporation’s (AES) weakness became apparent after the stock corrected more than 10% in the last two trading sessions. On October 4, 2016, it fell more than 4% and settled at $11.95. That day, the stock was trading at a 3% discount and a 7% premium to its 50-day and 200-day moving averages, respectively. The fair discount to its 50-day moving average highlights the weakness of the stock.
Moving averages show that when a stock rises above a particular moving average, it’s a bullish sign. When it falls below that average, it’s bearish.
Peer NRG Energy (NRG) is currently trading at an 11% and 19% discount to its 50-day and 200-day moving averages, respectively.
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AES’s RSI (relative strength index) currently stands at 38. It has fallen from 63 to 38 in the last week during the recent significant correction.
RSI is a momentum indicator made up of values between 0 and 100. Movements below 30 are considered to be in the “oversold” zone, and movements above 70 are considered to be in the “overbought” zone.
According to a recent report, short interest in AES rose 7% in the middle of September. Total shorted shares at the end of August were 11.4 million compared to a short of 12.2 million on September 15, 2016. The rise in short interest is an indication of substantial downside expectations for AES from its current levels. However, the recent fall in AES may have seen a sharp short covering.
Now let’s take a closer look at AES’s current valuation.