Severn Trent is coming near to the resistance and could be driven in a correction phase.

In a fundamental viewpoint, despite a high yield, the company should know a decline regarding its financial performance in 2015. Indeed, in 2015 its P/E ratio is given at 22.1x whereas the industry average is currently established at 16.35x. Moreover Earnings Per Share (EPS) should fall by 50% between 2014 and 2015.

Technically, the security could run out of steam close to the GBp 2000 resistance. Indeed, the stock is moving in an upward trend in the short term but it could know a halt. In this context, the downward movement could improve and it should expect a return to GBp 1919. Indicators that show an overbought situation confirm this scenario.

The technical configuration and fundamentals lead us to predict a consolidation phase, at least in the short term. The GBp 2000 should play its full role and to stop the upward trend initiated in the short term. Therefore, to take advantage of this technical correction, a short position may be opened in the current area to target GBp 1919. In case of further acceleration, the stop loss will be triggered above the GBp 2000.