Centrica share price history: done filling and ready to move
11:17, 1 September 2020
Centrica shares continue to trade at roughly half their value from the start of the year as the British gas giant continues to struggle to turn its ship around in an environment poised by falling natural gas prices, regulatory price caps and hostile union activity.
However, Centrica share price history shows that the stock recently received a kick after the company announced it reached a deal to sell its North American unit to Direct Energy for $3.6bn, which should provide ample cash for its management team to continue restructuring the firm.
Centrica share performance
Centrica shares are down 47 per cent so far this year after closing the week at 46p per share. However, they have rebounded from their March bottom of 30p per share, delivering a 53 per cent gain since then to investors who had the stomach to jump in during those dark days.
Analysts continue to be bullish on the company as a long-term pick, which has provided a floor for its shares, while the management’s efforts to restructure Centrica’s core business continue to bring hope to investors.
According to information from CNN Money, a total of five out of 12 analysts surveyed have rated Centrica shares a buy, while six continue to see it as a hold. Only one analyst is currently camping on the bear’s side.
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Centrica share price history
Centrica share price history graph covering the past two years shows how the stock has been trending down. It lost roughly three-quarters of its value since its mid-2018 peak at 160p per share while attempting to recover some lost territory at the beginning of 2020 – an effort that was greeted by the virus situation which plunged the stock even further.
By studying the company’s price action in these past two years we can see how different price trends have emerged and how the stock has reacted to trend line breaks in the past, especially the ones in late 2018 and February 2020, both of which led to dramatic downward movements.
This points to the fact that price trends remain a valid way to anticipate potential big moves in Centrica’s share price. Right now Centrica shares appear to be forming a symmetrical triangle that is close to reaching its tip.
This formation points to a potential break, although it is a neutral pattern – which means that the direction of the break can go either way.
Based on that, traders should keep an eye on how the price action behaves in the next few weeks as any potential break of any of these trend lines – upper or lower – could signal where the stock will be heading next.
Centrica shares history shows two important price gaps that were opened during the pandemic sell-off this year. These gaps must be eventually fulfilled, although nobody can predict when or why.
However, they remain an opportunity as market makers will feel tempted to push the stock towards those gaps to give any bull run a solid floor to move higher and higher – assuming such a run will happen some day.
On the other hand, another gap came up on the day the sale of the US business unit was announced, although that gap has already been filled by the latest price action. That gap is something we can focus on to draft a Centrica share price forecast.
Centrica share price forecast
This sale is not small news for Centrica, as the liquidity provided by that deal could help the company in doing a few of these things:
- Pay a portion of its 2.8-billion pounds’ net debt
- Repurchase a portion of its shares
- Continue restructuring the firm to increase its profitability over time
All of these elements are likely to favour Centrica’s share price one way or the other and management seems to be committed to delivering results.
The chart above shows that investors initially reacted positively to the news although shares went down after that one-day jump. This could relate to a technical factor rather than the stock’s outlook, as market participants may have preferred to fill that gap before pushing the stock higher, as this would provide more stability to an upcoming bull run.
Based on that thesis, it can be argued that Centrica shares are likely to break above that wedge, with a potential target at 60p – the stock’s 200-day moving average. This would be a nice level to achieve for the firm’s shares as it will indicate that the market is now more confident about the company’s long-term outlook.
On the other hand, if a bearish break is to take place, the 30p level has provided strong support even during the sharp pandemic sell-off of February.
On the other hand, it is important to note that the MACD is trending lower and has already crossed below the signal line in August. This could be the oscillator’s recollection of the market’s movement towards filling that price gap.
There is no assurance, of course, as to which direction the break will take, but this formation is pointing to a next big move ahead for Centrica shares and traders should be prepared to jump in once the pattern is confirmed.
For that to happen, it would be positive to see a spike in trading volumes once the break takes place, although no price gaps should be left behind to avoid another short-term pullback.
Meanwhile, it would be good to see the RSI posting new highs – possibly above the 60 and 80 level – if a bullish break is to take place. On the other hand, a push below should also result in a lower low for the RSI.
On the other hand, based on the targets provided in this article – 60p and 30p for a bullish and bearish break respectively – there’s a 30+ per cent upside for both long and short positions at today’s closing price if those targets were to be hit.
Read more: Centrica share price forecast: trading opportunities for both buyers and sellers
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