Trading Update: Edison International Sees Stock Rebound After Upgrade

Edison International EIX shares climbed on Wednesday following an upgrade from entirely Sell to Neutral by the brokerage firm Ladenburg Thalmann. Analysts believe that the recent sharp decline in stock price was excessive.

Understanding the Impact of Recent Events

Despite significant company news, understanding technical analysis remains pivotal for both traders and investors. The ongoing fluctuations make Edison International our Stock of the Day.

Market concerns arose due to wildfires in Los Angeles, which negatively affects Edison, as it generates and distributes electricity mainly in Southern California. The company will see a drop in revenue because it cannot supply power to areas impacted by the fires.

Additionally, the potential for legal troubles looms. A lawsuit has been filed, claiming that equipment owned by Edison contributed to igniting the fire.

Technical Analysis: The Importance of Support Levels

Even in the face of adverse events, technical analysis remains relevant. In the financial world, certain price points, referred to as support and resistance levels, hold significant importance.

The saying “Markets have memories” encapsulates the idea that these price levels can have a lasting impact, sometimes for weeks, months, or even years. For Edison, the $55 mark has served as a support level since October 2020. This price point has repeatedly attracted buyers, providing stability during downturns.

This phenomenon isn’t merely coincidental; support tends to develop at previously established price points. Many investors regrettably sell shares at support levels, wishing to re-enter at the same price if the stock rallies afterward.

Thus, when the price eventually returns to this historic support level, buy orders from prior sellers can emerge. If enough buyers respond, it strengthens the support at that price point.

The consistent $55 support level in Edison International’s chart illustrates this well, having remained relevant for more than four years.