The Red Electrica Corporacion SA stock (BME: REE) is still in good shape, despite the economic downturn due to the coronavirus. The Spanish telecommunication and utility giant is trying to make the most out of the “Stay At Home” rule, as people are locked in their homes during this pandemic. Although the stock took a strong hit together with the rest of the market in the beginning of the month, during the second half of it, the price managed to recover around 50% of its losses. REE travelled higher and broke above its short-term downside resistance line taken from the high of February 21st. After that, the share price hit resistance at around 17.05, from which it is now correcting lower. Even if we see the stock drifting a bit lower, as long as it stays above a short-term tentative upside support line taken from the low of March 16th, we will remain positive.
As mentioned above, the stock may slide a bit more and test the 16.07 support area, marked near the highs of March 18th and 27th. If that area, or even the aforementioned upside line continue to provide decent support for the share price, new buyers may emerge and lift REE up again. A test and a break of the 17.05 barrier would confirm a forthcoming higher high and could send the stock further north. That’s when we will once again aim for the 17.75 and 18.29 level, marked by the low and the high of March 5th.
Looking at our oscillators, the RSI and the MACD, it seems that there is still an ample of positivity in those indicators, which may support the idea of seeing a bit of upside. Despite currently pointing slightly lower, the RSI remains above 50. The MACD has moved away from its lows and continues to point higher, while sitting above its trigger line. However, it still remains below zero.
Alternatively, if the aforementioned upside line breaks and the share price falls below the 15.36 zone, which is the inside swing high of March 25th, this could temporarily spook potential new investors from entering. The stock could then slide to the 14.33 hurdle, or even the 13.96 area, marked by the low of March 23rd. REE might get a hold-up around there, or even correct slightly higher. That said, if the buying activity is still on the weaker side, the share price may drop again, where the next possible support level could be seen near the 13.06 obstacle, which is the lowest point of March.
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