When long-term overbought signals are triggered as a stock falls 2%, it gets our attention. Today we will examine Consolidated Edison (ED) as its share price fell by more than 2% Tuesday. Some backing and filling can be bullish, so let's see where support is for Con Ed.
On Nov. 5, the stock made a new 2014 high at $64.73. It had already generated a long-term overbought condition, but had no downside momentum to trigger a long-term overbought signal to look for a pullback yet. On Nov. 6, ED made a lower low as it closed at $63.25, which was below the Nov. 5 low at $63.54. The share price fell over 5% from the Nov. 5 high at $64.73 to the Nov. 25 low at $61.45.
Can history repeat itself?
On Dec. 29 Con Ed shares made a new 2014 high at $68.92. ED had already generated a long-term overbought condition, but had no downside momentum to trigger a long-term overbought signal to look for a pullback yet. On Dec. 30, it made a lower low as it closed at $66.91, which was below the Dec. 29 low at $67.67.
Can we expect a 5% pullback again? ED did close below the 0.236 retracement level at $67.15, using the Nov. 25 low at $61.45 and the Dec. 29 high at $68.29. ED filled the Dec. 24 gap at $66.91 yesterday also.
Other support levels for Consolidated Edison are:
- $66.06 (0.382 retracement)
- $65.18 (50% retracement)
- $64.30 (0.618 retracement)
Testing $66.06 would be more than a 4% pullback from the Dec. 29 high at $68.92. I would look to own or add to this pullback with $65.18 to 64.30 as the buying zone.
At the time of publication, Berman was long ED, although positions may change at any time.