Centrica Share Price is at Risk of a Major Plunge. Is it a Buy?

Centrica share price crashed to a low on May 9 of this year. The CNA stock was trading at 75.58p, which is about 20% below the highest level this year, giving it a market cap of over £4.4 billion. It has still risen by more than 35% in the past 12 months. So, is Centrica a good buy?

Is Centrica a good investment?

Centrica is a leading power company in the UK that serves more than 10.1 million customers. It does this through its different subsidiaries like British Gas, Bord Gais Energy, and Centrica Business Solutions. It also has upstream and energy marketing and trading divisions. The firm generated more than £948 million in adjusted operating profit in 2021 and had a free cash flow of over £1.1 billion. The firm has net cash of over £680 million.

The company has been going through a series of transformation measures as it seeks to reposition itself for growth. It has done that by selling some of its businesses like Direct Energy, Kings Lynn Power Station, Vista Solar, Clockwork, Lincs wind farm, and Trinidad and Tobago E&P assets, among others.

It is now a leaner company that seeks to achieve strong and profitable growth. The firm started construction of a new 50MW battery storage plant. Centrica has also made progress by reinstating its dividend and boosting its balance sheet. The firm has managed to acquire thousands of customers of the recently collapsed energy suppliers. 

Centrica share price forecast

The daily chart shows that the CNA stock price has been under pressure in the past few days. In this period, the stock formed a head and shoulders pattern, which is usually a bearish sign. At the same time, the Awesome Oscillator moved below the neutral line and is deeply in the red. The stock’s Relative Strength Index (RSI) has moved below the neutral level. 

Therefore, the stock will likely have a bearish breakout in the coming days. This will be confirmed if the stock moves below the neckline of the H&S pattern at $73. If this happens, the next key reference level to watch will be at 63p. The stop-loss of this trade will be at 80p.

Centrica share price