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Cheniere Energy in 2016: What's Driving the Bullish Sentiment?

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Part 7
Cheniere Energy in 2016: What's Driving the Bullish Sentiment? PART 7 OF 9

Cheniere Energy’s Short Interest: Higher Than Industry Average

Cheniere Energy’s short interest

Cheniere Energy (LNG) has a high short interest as percentage of float ratio of 11.4%. The ratio has declined after peaking to 14.4% at the end of March 2016. However, it’s still greater than the historical four-year average of 8.7%.

Cheniere Energy’s Short Interest: Higher Than Industry Average

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The above graph shows Cheniere Energy’s one-year closing price and short interest as a percentage of float. Short interest is the number of shares sold short. Short interest as a percentage of float is the number of shares sold short divided by floating shares.

A high percentage of short interest or an increase in short interest generally indicates pessimism for the stock. However, this might not necessarily result in a stock price decline since short position holders try to cover their short positions, which might result in a stock rally.

Industry average

Cheniere Energy’s short interest as a percentage of float ratio has remained high compared to the industry average. The Alerian MLP Index (AMZ), which tracks 50 energy MLPs, has an average short interest as a percentage of float of 2.8%. The energy sector as a whole has a short interest as percentage of float ratio of 2.9%.

Sunoco LP (SUN), Cheniere Energy Partners (CQP), NuStar Energy (NS), and DCP Midstream Partners (DPM) are among the AMZ constituents that have the highest short interest to float ratio.

Put call ratio

Put call ratio is another measure used to look at investor sentiment toward a stock. A high put call ratio might indicate that a lot of investors expect the stock price to decline in the future. Cheniere Energy has a put call ratio of 0.25.

Next, let’s see why Cheniere Energy could benefit from the addition of new markets.

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