Peabody Energy Corporation (NYSE:BTU) – Exit And Avoid Till It Sustains Above $20
Denver, CO, 09/16/2013 (Avauncer.com) – Peabody Energy Corporation (NYSE:BTU) (Closed: $17.98, Down: 3.18%) opened flat on Friday but had a vertical decline in the opening hour itself to settle near the day’s low and finally close there. It was the third negative close of the stock in the last 4 sessions. The price action formed a near perfect red Marubozu, the most bearish single candle pattern, which also engulfed the body of the previous day’s candle. The volume at 7 million was just slightly higher than the average volume of 6.8 million.
Sometime the major trend of a stock and the signs of initial shifting are more accurately perceived from the indicators than the actual price. The indicators in the daily or weekly chart of BTU show the major trend to remain firmly down even after the 8 week bounce from the low of $14.34 to $19.27. The daily RSI has not been able to cross the 70 levels even once in the last 3 years but has breached 30 now and again. The weekly RSI reinforces the point which has not gone above 60 even once in the same period. The MACD – Histogram has been tracing a positive divergence for a long time now in the weekly charts but the price is yet to confirm that.
The implication of the positive divergence is seen in the pattern formed by the price – a Falling Wedge. The fall from the 2012 top of $38.96 is much slower compared to the earlier drops. The rejection from the levels of $19 – $19.50 is due to both the historical supply zone and the upper boundary of the Falling Wedge. As long as $20 is not breached firmly on the upside, we can expect a break below $14.34 in the coming days.
Investors could exit the stock at the current market price or any rally till the price goes and sustains above $20.