Stock of the day: ENEL
23 June 2023
Enel, the Italian energy powerhouse, is currently at a crucial inflection point. This pivotal position is derived from its standing between two significant trends: a persistent long-term downtrend and a mid-term uptrend, which is essentially corrective in nature. The mid-term uptrend is forming a pattern that technical analysts refer to as a wedge. For Enel, it's evident that the end of this wedge may be imminent, given the progressively tightening lines.
A close inspection of the pattern shows the formation of a 'head and shoulders' structure within this wedge, marked in yellow. The recent completion of the right shoulder indicates the maturing of this pattern. At this juncture, Enel's price is testing the lower boundary of the wedge, simultaneously aligning with the neckline of the head and shoulder pattern (marked in blue). This confluence of two critical supports underscores the importance of this area.
A daily close below these support structures would be a strong bearish signal, implying the potential for a significant downward movement. This situation would activate a long-term sell signal, pushing Enel deeper into its long-term downtrend. On the contrary, as long as the price remains within the wedge, bulls can still harbor hopes for the continuation of the mid-term correction. However, they should remain cognizant of the possibility of a significant bearish shift if a breakout from the current supports occurs.