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What’s Next for CenterPoint Energy Stock?

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May. 2 2018, Updated 11:30 a.m. ET

Moving averages

CenterPoint Energy (CNP) stock has continued to trade close to its 52-week low after the company’s announcement to acquire Vectren (VVC) last week. CNP is currently trading 5% below its 50-day moving average and 14% below its 200-day moving average. The large discount to both averages suggests stock weakness. Its 50-day moving average of ~$26.80 is expected to act as resistance for CNP stock in the short term. CNP closed at $25.30 on April 30.

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CenterPoint Energy, which has a market cap of $11.0 billion, is set to buy natural gas company Vectren for $6 billion. Vectren shareholders are expected to receive $72 in cash for each share held. Natural gas remains one of the vital growth drivers for US power companies in the changing landscape for utilities (XLU).

Relative strength index

Currently, CNP’s RSI (relative strength index) score is 32. According to analysts, a stock is considered oversold when its RSI score drops below 30, and overbought when its RSI score rises above 70. Extreme RSI values could imply a stock price reversal.

Vectren

In comparison, Vectren has continued to trade at elevated levels since the acquisition news broke out. It is currently trading 10% above its 50-day moving average and 9% above its 200-day moving average. The stock’s large premium to both support levels indicates its strength. Its 200-day moving average of ~$64.50 is likely to act as a support in the near future. VVC is currently trading at $70.30, and its RSI score is 80, suggesting it is overbought.

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