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CNP Bull Flag

By

Gary Christie

on

September 25, 2019

As the utility sector continues to shine, one company is waving a bullish continuation flag.

The Utilities sector remains one of the best sectors in the S&P 500. Looking at the SPDR Utilities Sector fund ETF (XLU), prices remain in an uptrend after climbing 2.36% in the last week making it the best weekly performer. Prices have made an impressive move climbing up over 24% in the last year

Using Trading Central's technical event screener, I searched inside the S&P 500 index for short-term bullish classical events happening in the U.S. Utilities sector. One utility stock with a classic pattern breakout caught my attention.

CenterPoint Energy (CNP: NYSE) confirmed a bullish flag pattern.  CenterPoint Energy owns a portfolio of energy-related businesses. Its regulated electric utility provides transmission and distribution services to more than 2.5 million customers in the Houston area, southern Indiana, and west central Ohio. The company has natural gas distribution systems in seven states serving approximately 4.5 million customers.

A bullish Flag pattern occurs during a dynamic market rally, representing a brief pause as the market “catches its breath” before running off again in the same direction. The pattern consists of two parallel trend lines, often sloping downward against the prevailing uptrend, and is confirmed when the price breaks through the upper boundary to resume the rise.

Classic chart patterns are most interesting to me due to the measured move target they provide.  CenterPoint Energy has a target in the range of $32.5 – $33.00 due the flag pattern breakout measured move.

Prices have also broken above their 200-day moving average around the $29.50 level, an average closely followed by technicians as they make ideal stop-loss levels in uptrends.

Finally, the Slow Stochastic indicator remains imbedded above its 80 level. Although this can be seen as overbought to some technicians, I like to see this indicator remain in overbought territory when prices are trending higher as it shows strong upside momentum. Stochastics is built on the premise that as prices increase, “close” prices tend to be closer to the upper end of the recent price range, and vice versa.

The investment ideas presented here are for information only.  They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing. Learn more.

Gary Christie

Head of North American Research
Gary has over 15 years in financial markets. Prior to joining TC, he served as an equity & derivatives specialist with TD Bank and Bank of America. Gary is regularly quoted in Bloomberg News, conducts many education and market outlook webinars for investment institutions all over the world and has been a guest speaker at the New York Traders Expo.
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