Utilities showing strength is a defensive investment move -- or so the story goes. Whether you believe that or not, it's happening right now -- Southern Company (N:SO) bears this out. Another stock that is looking good is American Electric Power (N:AEP). The chart below shows ARP's price action since September 2013, when it made a short-term bottom.
Since then, it rose to a peak in early 2015 and then started a 12-month rounded pullback. At the bottom it had retraced about 56% of the leg higher from September 2013. Now it's making higher lows against the resistance at 59.60. This sets up for a possible entry into the stock. The full rise and rounded pullback creates an AB=CD pattern that targets a move to about 75.70.
The trigger to participate in this move is a break of that resistance at 59.60. The last higher low at 57.50 makes for a natural level for a stop loss on the trade and only risks about $2 against a possible reward of $18. But it gets better. The stock pays a 3.8% dividend ($2.24 annually), to get you comfortable with waiting. Watch for earnings, due out January 28.