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TECHNICAL ANALYSIS


A Break Of Key Support For Reliant Energy

03/02/05 07:42:41 AM
by Kevin Hopson

A recent break of support could lead to further weakness for Reliant Energy.

Security:   RRI
Position:   N/A

Reliant Energy (RRI) has been in a defined uptrend since September 2004. However, a recent break of key support could spell weakness for the stock. For example, if you look at the seven-month chart, you will see that prices had been contained within the blue pitchfork up until last month. The break of last September's uptrend line (bottom parallel line of the blue pitchfork) in early February was the first sign of trouble. Fortunately, at that time, Reliant found support in the $12.15 to $12.25 range. This is the site of the black median line, the 61.8% retracement level from the December rally and the 38.2% retracement level from the September to December rally.

After the stock bounced off support here, Reliant moved back above the bottom blue parallel line, giving the impression that everything was all right. However, trading action the past few days has negated this. More specifically, note how prices have breached the two key retracement levels at $12.15, as well as the black median line. Though the stock is currently testing its 100-day exponential moving average (EMA) and the 1B channel line in the $11.90 to $12.00 range, prices are finding resistance along the black and green median lines. As a result, it will take a break of resistance in the $12.20 to $12.40 range to alleviate the current bearishness.

Figure 1: Reliant Energy. RRI has been in a defined uptrend since September 2004. However, a recent break of key support could spell weakness for the stock.
Graphic provided by: StockCharts.com.
 
In the meantime, there are a couple of key downside targets to focus on, should prices continue to pull back. The first area is the $11.37 to $11.57 range. This is the site of the stock's 150-day EMA, the bottom green parallel line and the 50% retracement level from the September-December rally. The second area, which should act as ultimate support, is the $10.90 to $11.20 range. This is the site of the stock's 200-day EMA, the 61.8% retracement level from the September-December rally, the bottom black parallel line, and the 2B channel line.



Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address: hopson_1@yahoo.com

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