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by Darius Anucauskas

Will Cautious Investors Turn Their Attention To Red Electrica?

With the equity market accelerating recently and driven mainly by the sharp interest in the fin-tech industry stocks, the investor interest in the shares of some technological companies is fading away, due to their current, relatively-high price. Some investors might switch their interest to slightly less-profitable company stocks, but more stable, like the ones in the utilities sector. Some utility stocks tend to be less volatile than other equities, which make them more attractive, when the general stock market is starting to run out of steam. In this scenario we look at the Red Electrica Corporacion SA (BME: REE) with a Beta of 0.22, which suggests that it is much less volatile, comparing to the general market.

From the technical side, since bottoming this year in mid-March, REE managed to recover some of its losses and is seen forming higher lows. That said, from the end of March, the stock is struggling to overcome the 17.05 barrier, which is marked by the high of March 31st. Given that the share price is still balancing above a short-term tentative upside support line taken from the low March 16th, we will take a cautiously-bullish approach and wait for a pop above the 17.05 area, before getting comfortable with slightly higher levels.

A break above the 17.05 zone would confirm a forthcoming higher high and could clear the way to the 17.62 obstacle, a break of which might set the stage for a move to the 18.29 level, marked by the high of March 5th.

The RSI and the MACD are somewhat flat, at the moment. However, the RSI is still above 50 and the MACD continues to balance above zero and its trigger line. Both indicators are somewhat in support of the above-discussed scenario.

Alternatively, if the aforementioned upside line breaks and the share price falls below the 16.11 hurdle, marked by the inside swing high of May 27th, this might spook new buyers from entering anytime soon. REE may fall to the 15.39 obstacle, a break of which could set the stage for a move to the 14.85 level, which acted as a strong support area throughout April.

RedElectrica-Daily

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