Is this an early warning from SSE?

SSE (LSE:SSE)

Just as the internet stuffed Yellow Pages, we sometimes wonder if all this energy-saving nonsense will stuff electricity company expectations. A visit to our local council website to report a street light failure resulted in an LED streetlight being fitted, substantially brighter than the grudging orange sodium glow and, if our exterior LED floodlights are anything to go by, substantially cheaper to run.

As these things do, our thoughts turned to one of the biggie companies and what their share price future looks like. In the case of SSE, it appears a dimmer switch risks being employed!

We've circled a little movement at the end of August as it risks being one of these "early warning" signals for a coming problem. The share broke the long-term uptrend since 2003 for a few sessions and, while the price was forced back above the red line on the chart, we have our doubts. Often these early warning things precede some grotty news making an appearance.

In the case of SSE, it's currently trading just above the 1,400p level and need only leak below 1,373p to enter a cycle toward an initial 1,250p and some stutters.

Our secondary, if (when) 1,250p breaks, comes along at 1,100p where it almost must bounce. Unfortunately, due to it breaking a major trend, the share price will find itself in a region where any negative news around such a point risks a hard short circuit down to 900p as best guess.

And then it gets seriously dangerous as the ultimate bottom calculates at 325p, this being the point we cannot calculate below.

However, it's nearly the festive season and also approaching winter, so the chances are yet another round of price increases will be mentioned. At time of writing, the share price requires above 1,520p to escape the immediate (dashed blue) downtrend and commence a cycle toward 1,590p, hopefully challenging the solid blue line, which allows us to generate all these grotty drop potentials.

Closure above 1,590p is liable to be game changing, suggesting longer-term movement to 1,758p with secondary, if bettered, at 2,082p.

For now, we'd submit it worth keeping an eye on as should 1,100p make an appearance, we'd tend expect quite a reasonable bounce.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.