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Sentiment Snapshot: Entergy Corporation (ETR)

Call buyers become energized as the security tests round-number support

by Andrea Kramer (akramer@sir-inc.com) 1/12/2009 3:00 PM

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While most of the broad market dips its toes into the red today, the shares of Entergy Corporation (ETR: sentiment, chart, options) have taken a different route. Bolstering the nuclear energy issue higher was a bullish brokerage note in Barron's, which predicted that the stock could get a boost amid President-elect Barack Obama's push for clean energy sources.

The article notes Obama's goal to reduce carbon emissions in the U.S. by 80% by 2050, using $150 billion over the next decade to create a cleaner future for energy. With nuclear plants the biggest producers of energy that doesn't emit greenhouse gases, Barron's states that "some of the power companies operating the 104 existing nuclear plants look tempting right now."

The column points to Entergy � the No. 2 nuclear-power generator in the U.S. � as a potential opportunity, noting the company's goal of reducing its carbon emissions to 20% below its 2000 levels by the end of 2010. As for controversial nuclear-waste disposal, Barron's notes that innovations such as dry-cask storage (the utilization of high-tech sealed containers kept on site) has helped ease safety fears.

In afternoon trading, the shares of ETR have added 40 cents, or 0.5%, to dawdle near the 80.50 level. From a longer-term perspective, the stock is attempting to establish a foothold at its 72-month moving average, hovering in the round-number 80 region. This neighborhood played the part of resistance during most of 2005 and 2006, and could now switch roles and act as support.

Monthly chart of ETR since May 2005 with 72-month moving average

Taking a look at the sentiment surrounding the shares, it seems the aforementioned Barron's author isn't the only one with high hopes for ETR. The security currently boasts 6 "strong buys" and 2 "buy" ratings, according to Zacks, compared to 3 "holds" and a lone "sell."

In addition, the average 12-month price target on the equity rests at $95.63, Thomson Financial reports. In order to attain this generous target � in a range the stock hasn't closed a session above since mid-September � the shares of ETR would need to skyrocket about 19% from their current trading range.

Meanwhile, during the past couple of weeks on the International Securities Exchange (ISE), the energy issue has seen more than 7 times as many calls than puts bought to open. What's more, this lofty ratio rests in the 72nd annual percentile when compared to similar readings during the past year, indicating that the recent preference for calls has been more palpable only 28% of the time during the past 52 weeks.

The escalating optimism of late could signify a reversal in sentiment among near-term options traders. The stock's Schaeffer's put/call open interest ratio (SOIR) � measuring options slated to expire within 3 months � stands at 1.77, only 3 percentage points from an annual pessimistic peak.

In conclusion, should the potential of Obama's energy plans continue to bolster Entergy shares higher, the lingering skeptics in the options arena could get spooked. However, while an unwinding of pessimism in the options pits could spark some buying pressure on ETR, it seems that most of the Street is already in the bullpen � leaving little room for additional upgrades and/or price-target boosts to provide sufficient fuel on the charts.

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Sentiment Snapshot: Entergy Corporation (ETR)

Call buyers become energized as the security tests round-number support

by Andrea Kramer (akramer@sir-inc.com) 1/12/2009 3:00 PM

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