FE - First Energy

I am look at First Energy (FE) for a potential low risk long trade.  I like to look for stocks that are making 52 week lows and are approaching or trading at clearly defined support levels.  Such is the case here. 

FE is down almost -20% since July, it is making 52 week lows, and it is approaching the $30 level.  The last four times that it traded down to these levels, in February 2014, August 2014, November 2015, and in October it found support and rallied.  (In November 2015 it traded slightly lower to $29 but it came right back.)

Most people try to catch the bottom.  This is more about ego and being able to tell oneself (and others) that they were smart enough to get the low trade.  In this case they would buy FE as soon as it hits $30.  I think there is a better way, and that is to enter the trade while it is back on its way up.  You wont catch the exact bottom but the Risk/Reward dynamics are much better and you won't get 'rolled over' if the support level breaks and a large selloff ensues.

In this case I would buy FE if it breaks the downtrend line.  All a downtrend line break means is that the forces of supply are no longer overpowering the forces of demand...or in plain English - it has stopped going down.  This would mean that the trade would probably be entered around the $30.75 level...while it is on its way back up.

My price target would be $34.75 because this was the recent high in September and November.  My initial stop-out would be at $30 adjusted to a tight trailing stop-out if it rallies.