Short Trade Idea
Enter your short position between $121.40 (yesterday’s intra-day low) and $123.41 (yesterday’s intra-day high).
Market Index Analysis
- Duke Energy (DUK) is a member of the S&P 100 and the S&P 500 indices.
- Both indices trade inside bearish chart patterns with rising bearish indicators.
- The Bull Bear Power Indicator for the S&P 500 Index is bearish with a descending trendline.
Market Sentiment Analysis
Equity markets rallied yesterday, building on Friday’s reversal, amid Federal Reserve Bank of New York President John Williams’ comments on a potential December interest rate cut. AI stocks led last week’s sell-off and reversal and are dragging equity futures lower this morning on the back of a contraction in NVIDIA. The AI bellwether is sliding after reports that Meta Platforms will spend billions to purchase chips from Google parent Alphabet’s AI chips. Investors will also receive delayed PPI and retail sales data, while bond yields remain high, flashing warning signs for equity markets amid the worrying AI bubble trend.
Duke Energy Fundamental Analysis
Duke Energy (DUK) operates seven nuclear facilities, amid a diverse mix of other power plants. Its service territory covers 104,000 square miles and includes 250,200 miles of distribution lines, serving over 7 million customers. Its nuclear power generation remains concentrated in North and South Carolina, and DUK maintains 58,200 megawatts of baseload and peak generation.
So, why am I bearish on DUK amid its pull-back?
While Duke Energy beat on revenue and earnings per share, DUK lowered the top end of its full-year EPS outlook from $6.42 to $6.35. A pair of price target downgrades is less worrying than its increased capital expenditure plans and its medium-term earnings impact. Its modest growth suggests its data center aspirations are either premature or overly confident, and the PEG ratio hints at an overvalued stock.
Duke Energy Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 19.23 makes DUK fairly valued. By comparison, the P/E ratio for the S&P 500 Index is 29.85.
The average analyst price target for DUK is $137.47. This suggests good upside potential, but downside risks remain elevated.
Duke Energy Technical Analysis
Today’s DUK Signal
Duke Energy Price Chart
- The DUK D1 chart shows price action inside a bearish price channel.
- It also shows price action between its ascending 50.0% and 61.8% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bearish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- DUK is moving lower as the S&P 500 Index recovers, a bearish trading confirmation.
My Call on Duke Energy
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I am taking a short position in DUK between $121.40 and $123.41. Valuations remain stretched, the PEG ratio confirms muted upside potential, and muted customer and sales data paint a bearish picture. Its view on data center demand is also overly optimistic.
- DUK Entry Level: Between $121.40 and $123.41
- DUK Take Profit: Between $105.20 and $110.51
- DUK Stop Loss: Between $127.85 and $129.86
- Risk/Reward Ratio: 2.51
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