It has been more than a decade since the share price of AES, one of the leading domestic power companies, hit $18. The price eclipsed the November and December breakout highs with little difficulty before stopping to knock on the 161.8% Fib extension three times. Upon breaking through, the resistance then became support and it is now building a base that I think is poised to make a run at the 261.8% Fib extension at $20. Twice overbought on the RSI since the beginning of the year, and with a steeply positive sloping 200 DMA, the momentum suggests higher prices ahead.
However, zoom out, and that’s where the chart gets really interesting.
AES traded in a range from $8-$15 for the last decade. Three times it attempted to push through resistance at $15.50 and failed before finally pushing through this fourth time in early February 2019. The break has been definitive, as the 161.8% Fib extension offered little resistance to an almost linear move. Is it a coincidence that the 423.6% extension happens to be right at the 2007 highs? I don’t think so. There is minimal downside risk to cheap out of the money August or November calls at a strike of $20 (or even $24).
Charts made with Optuma Software