NRG Energy Inc (NYSE: NRG)

NRG Energy, Inc. operates as a power company. The company provides electricity; system power, distributed generation, solar and wind products, backup generation, storage and distributed solar, demand response, energy efficiency, and on-site energy solutions; carbon management and specialty services; and various energy services, such as operations, maintenance, technical, development, and asset management services. The company also offers retail energy, rooftop solar, portable solar and battery products, and home services; and various bundled products, which combine energy with protection products, energy efficiency, and renewable energy solutions, as well as offers installation and contract management services for residential solar customers.

Take a look at the 1-year chart of NRG (NYSE: NRG) below with added notations:

1-year chart of NRG (NYSE: NRG)

NRG had been in a consistent downtrend up until the beginning of December. After that decline, the stock started trading sideways over the most recent two months. While in that sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.

The NRG rectangle pattern has formed a resistance at $12 (red), and a $9 support (green). At some point the stock will have to break one of the two levels.

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The Tale of the Tape: NRG is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $9 or on a breakout above $12. The ideal short opportunity would be on a break below $9.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach