AES (AES)

Company

"AES is one of the world's leading power companies. We generate and distribute electric power in 27 countries through an array of world-class power businesses. In some regions our power may drive supercomputers and cutting-edge industrial technologies, while in others we may be delivering the first reliable source of electricity to hospitals, homes, schools and businesses. Regardless of locale, we believe that electricity is essential to human progress and advancing economic growth, public health and security." (company website)

Sell short

12-May-05. AES started a downtrend after it peaked at the beginning of March (see sidebar). It broke through the lower Bollinger band yesterday and stretched it lower today. The omens seem right for further declines:

• Price momentum (PPO) — in a steady decline for past two months
• Trend (ADX) — picking up strength with selling pressure (-DI) sharply higher than buying pressure (+DI)
• Money flow (CMF) — declining steadily for past two months
• Relative strength (RSI) — weakening for past two months

Buy to cover

23-May-05. AES has been tormenting me for some days now, bouncing around just above $14. It seemed reasonably certain that it was going to move — the question was, Which way? That was answered this morning.

When the market opened, AES went crashing below the 200-day moving average to open at $13. By the time I reacted, the price had come back up. Since I covered, AES has come back up to trade just under the 200-day moving average.

Now the question is whether the 200-day moving average will become the resistance level, and if AES will move farther downward. The signs are right for that; the next couple of days will tell that tale.