Shares of Duke Energy Corp (NYSE:DUK) saw a little bump higher Monday as the broader energy and utilities sectors were buoyed by a rally in bonds and a slightly weaker dollar. Duke Energy is somewhat of a hybrid between a utility and energy company, and thus is at least somewhat sensitive to the dollar as well as moves in interest rates. That makes DUK stock a prime candidate to watch as we move through this Wednesday’s upcoming FOMC statement.
When Duke Energy reported its fourth-quarter results in mid-February, it saw a one-day bounce that quickly faded again the next day; DUK stock simply couldn’t hold its position thanks to rising interest rates and the surging dollar.
Additionally, Duke missed earnings estimates for Q4 and guided 2015 profits a penny per share below what analysts had expected.
Thanks to the rise in interest rates, DUK stock has now dropped more than 17% in a straight line since late January, leaving Duke stock with a 4.2% dividend yield on current prices. When a company’s structural picture and/or news-flow matches up with a promising technical picture, I sit up and take notice — and with the recent selloff, an opportunity for a bounce in DUK stock looks increasingly likely.
But before we look at the charts, remember: Wednesday’s FOMC meeting looms large, and the setup in DUK largely depends on how hawkish or dovish Janet Yellen’s statement is.
DUK Stock Charts
Looking at the multiyear weekly chart, we see that DUK stock has been trading in an orderly, upsloping channel ever since the 2009 bottom. The steep rally in Q4 2014 and the first part of January led Duke Energy to overshoot out of this channel, leaving it extremely overbought and at risk of a meaningful mean-reversion move lower.
Fast forward to today, and in a matter of just a few weeks DUK stock mean-reverted from those overbought readings down to the lower end of the channel. As such, DUK has reached a major multiyear support line, and also has reached oversold readings from a momentum perspective.
On the daily chart, we see that the recent drop in DUK has also brought it back to an area that previously acted as resistance until last October, as the Relative Strength Index (RSI) reached oversold levels it hasn’t seen since 2013.
From a technical perspective, DUK stock has reached a good support area on both the longer- and near-term charts where a better bounce/rally could result. However, as per above, I reiterate that this trade setup will be confirmed (or not) on the back of Wednesday’s FOMC statement. If a dovish tone ensues Wednesday and investors choose to push bonds higher as a result, then we could see a softening in the dollar, too, all of which would be supportive of a move in Duke Energy back up to the low $80s.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
