Playing the Momentum Building in AES

Published on Tuesday, 16 March 2010 08:20 Written by Christian Paolinetti

New York, March 16th (TradersHuddle.com) - Shares of AES Corporation (NYSE:AES) closed the trading session at $11.57 placing the price action in a very tight range, given that calculated support is set at $11.08 and the calculated resistance based on an algorithm of peaks and troughs is set at $11.70

AES Corporation (NYSE:AES), together with its subsidiaries, engages in the generation and distribution of electricity in Asia, North America, Europe, Latin America, and Africa. The Company sells electricity under long term contracts and serves customers under its regulated utility businesses.The company generates electricity through various resources, including coal, gas, and fuel oil, as well as hydro, wind, and solar.

AES's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to AES's price action, as any movement outside its predefined range of $11.08 and $11.70 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $11.08 could spark above average selling. A tiered approach can be a good way to approach starting a position in AES's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.