Short Trade Idea
Enter your short position between $40.17 (the lower band of its horizontal resistance zone) and $40.80 (the upper band of its horizontal resistance zone).
Market Index Analysis
- CenterPoint Energy (CNP) is a member of the S&P 500 Index.
- This index trades in a bearish chart pattern with rising bearish trading volumes.
- The Bull Bear Power Indicator of the S&P 500 Index is bearish with a descending trendline.
Market Sentiment Analysis
Equity markets extended their slide amid heavy selling in software stocks and a general rotation out of tech. AMD shares plunged despite delivering better-than-expected results, but the outlook disappointed. Alphabet reported solid earnings and massive capital expenditures, transforming itself from an AI laggard to an AI leader. Qualcomm shares tumbled after the company issued a weak outlook. The ADP employment report delivered another worse-than-expected reading on the labor market. Amazon’s earnings are in focus today and could set the tone for markets.
CenterPoint Energy Fundamental Analysis
CenterPoint Energy is a utility company providing electric and natural gas services to over 7,000,000 customers in Indiana, Ohio, Louisiana, Minnesota, Mississippi, and Texas.
So, why am I bearish on CNP ahead of its earnings?
I am bearish on its profit margins, which trail the industry average, while its return on assets is a significant red flag. Weak growth prospects and a negative earnings trajectory do not warrant current prices, which trade near the average analyst estimate, suggesting limited upside potential. The sale of its Vectren Energy Delivery of Ohio lowered revenue potential, hinting that CNP turned defensive. I am also worried about the increase in short interest and see a correction on the horizon.
Metric | Value | Verdict |
P/E Ratio | 25.38 | Bearish |
P/B Ratio | 2.38 | Bullish |
PEG Ratio | 2.44 | Bearish |
Current Ratio | 0.51 | Bearish |
ROIC-WACC Ratio | Negative | Bearish |
The price-to-earnings (P/E) ratio of 25.38 makes CNP an expensive stock relative to its peers but inexpensive compared to the S&P 500 Index. By comparison, the P/E ratio for the S&P 500 is 29.56.
The average analyst price target for CNP is $42.50, suggesting negligible upside potential with rising downside risks.
CenterPoint Energy Technical Analysis
Today’s CNP Signal
- The CNP D1 chart shows price action inside a massive horizontal resistance zone.
- It also shows price action trading between its ascending 0.0% and 38.2% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bullish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- CNP advanced with the S&P 500 Index, a bullish confirmation, but bearish catalysts are rising.
My CNP Short Stock Trade
- CNP Entry Level: Between $40.17 and $40.80
- CNP Take Profit: Between $33.24 and $34.09
- CNP Stop Loss: Between $42.50 and $43.78
- Risk/Reward Ratio: 2.97
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