OGE Energy (OGE) is Ready to Breakout

OGE Energy (OGE) is a holding company for Oklahoma Gas & Electric, a regulated utility offering electricity generation, transmission, and distribution to more than 800,000 customers in Oklahoma and western Arkansas…

The company is seeing decreased demand due volatility in oil and natural gas from the pandemic. Due to the uncertainty of the pandemic, the short-term outlook of the oil and gas industry looks remains poor, which dims future prospects for the company.

OGE has an unfavorable balance sheet with $3.5 billion in long-term debt and only $32 million in cash. The company also has a current ratio below 1 and a negative return on equity. Sales growth is negative for the year and is down over the last five years.

The company is also overvalued with a Price to Sales ratio of 3.2 and an EV/EBITDA of 51. Although the stock is up 2.7% for the month, its near and long-term momentum are bearish.

Take a look at the 1-year chart of Host OGE below with my added notations:

 Chart of OGE provided by TradingView

During the past several months, OGE has formed a key level of resistance at the $35 (red) mark. The stock has tested that level a couple of times since the March drop, and now seems to be headed back up that way again. A solid close above $35 should lead to higher prices for OGE.

 A long trade could be entered on a breakthrough of the $35 resistance level.

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Christian Tharpe, CMT