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NRG Energy Stock Remains Weak, Trades in the Oversold Zone

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Stock down ~20% from its 52-week high

Merchant power stock NRG Energy (NRG) has been on a falling spree recently and has fallen almost 12% so far this month. The Utilities Select Sector SPDR ETF (XLU), which represents the top utilities, has fallen 1% in the same period.

Weaker-than-expected first-quarter earnings could be one of the important drivers of the stock’s fall. The recent weakness in NRG Energy stock has pushed it into the oversold zone with an RSI (relative strength index) of 20. RSI values of below 30 and above 70 indicate impending reversals in a stock’s direction.

NRG dma

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Moving averages

NRG Energy stock is currently trading at $36.2, almost 12% and 7% below its 50-day and 200-day moving averages, respectively. The stock’s large discounts to both these support levels suggest weakness. NRG’s fall below its 200-day moving average could concern investors. This level of $38.9 could act as a crucial resistance level for NRG in the short term.

NRG is one of the most volatile stocks among utilities. On May 14, implied volatility in NRG Energy stock was close to 27% compared to utilities’ average of 12%.

First-quarter earnings

NRG Energy reported income from continuing operations of $94 million in the first quarter of 2019, a steep fall of ~60% compared to its income in the first quarter of 2018. Despite the fall, NRG’s management has kept its guidance unchanged for 2019. It expects adjusted EBITDA of $1.85 billion–$2.05 billion in the current year, an expected increase of ~10% year-over-year.

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