Do Short Interest and Technical Indicators Accent PPL’s Weakness?
PPL shares look significantly weak
Even three months after the Brexit vote, PPL Corporation (PPL) has still not gotten over its downward market spree. In 3Q16, it has corrected more than 17%, one of the highest falls for the S&P 500 Utilities (XLU).
On October 5, 2016, PPL was trading at an 8% discount and an 11% discount to its 50-day and 200-day moving averages, respectively. The stock breaking above its 50-day and 200-day moving averages can be termed as a bullish sign, which seems precarious for PPL in the near term. 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.
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Relative strength index
PPL’s RSI (relative strength index) currently stands at 30. It has fallen from 50 to 30 in the last week during the recent significant correction. Buyers may see renewed interest in PPL, given that the stock is near the oversold zone.
RSI is a momentum indicator made up of values between 0 and 100. Movements below 30 are considered in the “oversold” zone, and movements above 70 are considered in the “overbought” zone.
According to a recent report, short interest in PPL rose 10% in the middle of September 2016. Total shorted shares at the end of August were 7.7 million compared to a short of 8.5 million on September 15, 2016.
The rise in short interest is an indication of substantial downside expectations for PPL from its current levels. However, the recent fall in PPL may have seen a sharp short covering.