AES Stock Is Moments Away from Initiating an Incredible Run

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AES Stock: Embedded Price Patterns Magnify the Moves That Follow

Throughout the market turmoil that plagued the markets in the first quarter, I have continued to look forward, believing that the elevated levels of volatility that caused the wild market swings will subside and that the markets will once again make an attempt at higher prices.

In my search for investments that are setting up to advance, I have come across AES Corp (NYSE:AES) stock, and I am quite excited about my findings. AES stock is a very compelling and intriguing stock because it is currently testing a significant level of price resistance, where breaking above it will open the door to much higher stock prices.

This level of price resistance is highlighted on the following AES Corp stock chart.

Chart courtesy of StockCharts.com

This AES stock chart focuses on the price action that has occurred year to date, and it clearly shows that a significant level of price resistance currently resides at $11.80.

This level of price resistance was first established in the middle of January, after AES Corp stock staged a move toward higher prices. That advance peaked at $11.80, and after a second attempt at breaking beyond it later that month, a substantial sell-off ensued. This sell-off coincided with the turmoil that the major market indices suffered.

In mid-February, AES stock found its footing and began making an orderly advance toward higher prices. This advance consisted of a series of higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend.

By the end of March, a golden cross was generated when the faster 50-day moving average, highlighted in blue, crossed above the slower 200-day moving average, highlighted in red. This signal suggests that a bull market is in development.

Since the golden cross was generated, AES Corp stock continued its orderly advance, and it is once again testing price resistance, which currently resides at $11.80.

Breaking above this significant level of price resistance would create a new year-to-date high, which would imply that further gains are likely in 2018.

The ramifications of such an event are magnified when I take a step back and look at the price action using a longer scale, because breaking above $11.80 on a sustained basis will also complete a very large technical price pattern.

The technical price pattern is highlighted on the following AES Corp stock chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on the AES stock chart is a cup-and-handle pattern.

Cup-and-handle price patterns are characterized by two distinct troughs, where the first trough is much larger than the second. These troughs are created because a significant level of price resistance has prevented the stock price from advancing beyond it.

The cup-and-handle price pattern on the AES Corp stock chart has been in development for four years, making it a large pattern. This is significant because the bigger the pattern is, the more significance it carries.

Breaking above resistance at $11.80 would complete the cup-and-handle price pattern, suggesting that higher stock prices are likely to follow.

The new year-to-date high and a completed cup-and-handle price pattern would be enough to suggest that higher AES stock prices will follow once resistance is broken, but there is more.

The following AES Corp stock chart illustrates that the cup-and-handle price pattern is actually embedded within a much larger price pattern.

Chart courtesy of StockCharts.com

The much larger technical price pattern highlighted on the AES stock chart is a symmetrical triangle.

Symmetrical triangles are identified using two converging trend lines, which are created by connecting the series of lower highs and higher lows that characterize this pattern. These trend lines identify the pattern as well as significant levels of price support and price resistance.

Triangle patterns are very special price patterns because the confinement of space created by the converging trend lines causes energy to build within the pattern. The larger the pattern, the more energy is contained within it. The symmetrical triangle on the AES stock chart is in its 12th year of development, making it an extremely large pattern.

Once the stock price breaks above $11.80 on a sustained basis, it will complete this exceptionally large triangle pattern. As a result, an exceptionally large reaction is expected to follow once this event occurs.

Analyst Take

I am watching AES Corp stock with great anticipation because a sustained close above $11.80 would complete a number of technical price patterns. The size and scope of these patterns implies that when such an event does occur, an incredible run toward higher AES stock prices is expected to follow.