Money Markets

Reading the Tea Leaves for Southwestern Energy Company (SWN)

Recent price movements in the stock of Southwestern Energy Company (NYSE:SWN) have caught the attention of the investment community. It is widely believed that a stock’s future performance can best be predicted by analyzing prior trends and patterns in price. In the case of SWN, the chart has some interesting things to say about where the stock might be headed in the future.

How has the stock performed recently?

Southwestern Energy Company (NYSE:SWN) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of SWN has decreased -6.88%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 3158%. After the latest session, which saw the stock close at a price of $5.41, SWN sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that SWN may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for SWN is 44.76%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 54.39%, tells a similar story, and suggests that SWN currently trades in neutral territory.

What do the trading volumes reveal?

Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. Southwestern Energy Company (SWN) average trading volume of 20,992,775 during the past month is 12.15% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.

What do the analysts think?

SWN is currently undervalued by -29.28% relative to the average 1-year price target of $7.65 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70, which implies that analysts are generally neutral in their outlook for SWN over the next year.

How risky is the stock?

Absolute price performance isn’t the only thing analysts consider when predicting future performance: volatility matters as well. Beta, which measures the stock’s volatility relative to the overall market, is a simple but effective metric for assessing risk.

Southwestern Energy Company (NYSE:SWN) has a beta of 1.27, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. SWN therefore has an above average level of market risk. During the past couple of weeks, SWN average daily volatility was 51.09%, which is -3.12 percentage points higher than the average volatility over the past 100 days.

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