Exelon corrects in August
Leading nuclear generator Exelon Corporation (EXC) has corrected more than 12% in August 2016. Utility stocks have started showing weakness—particularly after investors dumped them due to their concerning valuation. The Fed’s slightly positive commentary about a rate hike this September might have also extended the fall. Utilities began their downward movement prior to their second quarter earnings, and so far they’ve corrected approximately 10%.
As of August 26, 2016, Exelon was trading at a 5% discount to its 50-day moving average. Exelon breaking below this level highlights the weakness in the stock. On the other hand, it’s trading at a 4% premium to its 200-day moving average.
You can analyze moving averages two ways. The first method is price crossover, and the second is using two or more moving averages. The first method shows that when a stock price exceeds a particular moving average, it’s a bullish sign, and vice versa. On the other hand, according to the second method, when a shorter moving average crosses over a longer moving average, it’s a “buy” signal for the stock.
FirstEnergy (FE) is trading at 6% and 4% discounts to its 50-day and 200-day moving averages, respectively. Public Service Enterprise (PEG) is also trading at 7% and 2% discounts to its 50-day and 200-day moving averages, respectively. These hybrid utility stocks may continue to witness major weakness if they remain below their respective slower moving averages.
Exelon’s RSI (relative strength index) is currently 33, which shows it’s heading towards an oversold zone. The RSI is a momentum indicator made up of values between 0 and 100. Movements below 30 are considered “oversold.” Movements above 70 are considered “overbought.”