The Detroit-based diversified energy company involved in the development and management of energy-related businesses and services, DTE Energy Co (NYSE: DTE) seems to be ready for a price correction in the near term according to its latest charts.
Bearish Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past several months. This is a bearish pattern and is marked in orange color in the daily chart. The stock is currently moving down after reaching the top rail of the rising wedge pattern. This indicates that the stock may move lower in the near-term.
Daily Chart -DTE
#2 RSI moving down: The daily chart shows that the RSI is moving down after reaching near overbought levels. This indicates the stock may move lower.
[hana-code-insert name=’adsense-article’ /]#3 Bearish Aroon: The Aroon indicator shows bearishness as the Aroon up is below 30 and the Aroon down is near 70.#4 Bearish Divergence between RSI and Price: The daily chart shows that there is a bearish divergence between RSI and price.
This is marked as blue dotted lines.
While the price was making higher highs, RSI was forming lower highs. This is a possible bearish sign.
#5 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating bearishness.
#6 Bearish Candle: The latest candle is a bearish candle with an upper shadow (shooting star).
This indicates that there was a selling pressure at higher prices. The stock had also closed down from the day’s high. This shows that after forming a long-tailed bearish candle, the stock was not able to cross above this level since then. This is another bearish sign.
#7 %K below %D: In the weekly chart, the %K line of the stochastic has currently crossed below the %D line. The stochastic is also currently near overbought levels. All this indicates bearishness.
Weekly Chart -DTE
#8 Bearish Divergence between Stochastic and Price: The daily chart shows that there is a bearish divergence between Stochastic and price. This is marked as blue dotted lines. While the price was making higher highs, Stochastic was forming lower highs. This indicates bearishness.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for DTE is below the price of $115. But for those with a higher risk appetite, you can sell half the intended quantity of shares at the current price of $119.17.
TP: Our target prices are $110 and if it closes below it, $100.
SL: To limit risk, place a stop loss at $120.90. Note that this stop loss is on a closing basis.
Our target potential downside is 7% to 16% in the next 3-6 months.
- Sell at $119.17: For a risk of $1.73, our target rewards are $9.17 and $19.17. This is a nearly 1:5 and 1:11 risk-reward trade.
- Sell at $115: For a risk of $5.90, our target reward (TP#2) is $15. This is a nearly 1:3 risk-reward trade.
In other words, this trade offers nearly 3x to 11x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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