Chart of the Day: American Electric Power (AEP)

After a very volatile March, American Electric Power (AEP) has moved into a horizontal channel and there is a breakout trade setting up for smart and patient investors…

AEP is one of the largest regulated utilities in the United States, providing electricity generation, transmission, and distribution to more than 5 million retail customers in 11 states.

Like almost every stock, AEP experienced a huge downmove in February and March of this year.  The stock bottomed on March 23rd at $65 and it’s currently trading at about $82.

In the past few months, shares of AEP have been in a trading range and a horizontal channel was formed.  A horizontal channel occurs when an asset’s, in this case a stock, price ranges sideways and support and resistance levels are formed.

areas where breakout trades could occur.  A breakout is when the price of an asset moves above a resistance level or below a support level.  A breakout to the upside signals traders to buy the asset or cover short positions, while a breakout to the downside signals traders to get short or sell long positions.

Take a look at the 1-year chart of AEP below with added notations…

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