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Does Southern Company Stock Look Strong?

Vineet Kulkarni - Author
By

Nov. 21 2018, Published 2:25 p.m. ET

Chart indicators

Southern Company (SO), the top-yielding utility stock, has outperformed broader utilities (XLU) since the Fed delivered its third interest rate hike in September. Utilities are sensitive to interest rates. Rising rates make utilities relatively less attractive compared to bonds. In this series, we’ll discuss how Southern Company stock could trade going forward.

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Moving averages

Southern Company, the second-largest regulated utility, stock is trading at $47.66—more than 4% and 3% above its 50-day and 200-day simple moving average levels, respectively. The premium to both of these support levels indicates strength in the stock. The moving averages close to $44.78 and $45.11 are expected to act as support levels for Southern Company in the near future.

Relative strength index

Southern Company’s RSI (relative strength index) is 53, which shows that it isn’t in the “overbought” or the “oversold” zone. A stock is considered “oversold” when its RSI drops below 30 and “overbought” when its RSI rises above 70. Extreme RSI values could suggest an impending reversal in the stock’s direction.

Recently, Southern Company stock witnessed an implied volatility of 18%—marginally lower than its 15-day average volatility. In comparison, the Utilities Select Sector SPDR ETF’s (XLU) volatility was 16%, while the S&P 500’s volatility was 19%.

Southern Company stock is trading 10.0% lower than its 52-week high of $52.0 in November 2017. The stock has rallied more than 10.0% since its 52-week low of $42.38 in February.

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