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Will NRG Energy Sustain the Recovery?

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NRG Energy: Strong rally after bottoming out

NRG Energy (NRG) has been under strong pressure due to weak power prices and its poorly performing solar business over the last couple of quarters. More than half of NRG’s market capitalization vanished last year. However, it has gained nearly 20% so far this year, mimicking regulated utilities (XLU).

The central question that still haunts investors is whether the NRG rally will continue. Since natural gas prices continue to trade suspiciously, independent power producers such as Dynegy (DYN), Calpine, (CPN) and Talen Energy (TLN) may continue to trade under pressure.

Will NRG Energy Sustain the Recovery?

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Momentum oscillators

The above graph shows NRG Energy’s one-year stock price movement compared to its 50-day and 200-day moving averages. Currently, NRG Energy is trading at a 17% premium and a 15% discount to its 50-day and 200-day moving averages, respectively. The stock is trading below its longer (slower) 200-day moving average, which indicates a weakness in the stock in the longer term.

An outstanding rally in NRG Energy so far this year has been pushing its RSI (relative strength index) upward. Currently, it stands at 61. The RSI is a momentum indicator made up of values between 0 and 100. Movements below 30 are considered to be in the “oversold” zone. Movements above 70 are in the “overbought” zone.

The high volatility in NRG’s earnings has been reflected in its stock movement in the last several quarters. In this series, we’ll see NRG Energy from the investment perspective. Let’s see what it has to offer investors this year.

In the next part of this series, we’ll see how NRG Energy’s margins are struggling as wholesale operations weaken.

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