Interactive Investor

Analysis: bank sector prospects and outlook for Lloyds shares

13th February 2023 07:34

by Alistair Strang from Trends and Targets

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After his optimistic forecasts a year ago came true, independent analyst Alistair Strang reveals what his software says about potential for the UK banks as results season gets under way.  

lloyds 600 GettyImages

    When we reviewed the banking sector in January last year, we were surprisingly optimistic, daring to suggest closure above 3,673 points shall open the doors for longer term oomph. To our surprise, the fairy tale actually came true and the sector overall now appears poised for gains of 20% and beyond.

    Historically, we distrust the UK banks, price movements tending be slow and untrustworthy. Maybe times are changing.

    Trading around 3,846 at time of writing, the index needs to close a session below 3,370 points (green Line on chart) to utterly foul up our arguments promoting optimism for the future!

    It’s now the case where movement above 3,930 points calculates with the potential of a continued lift to 4,428 points with our longer term secondary, if bettered, working out at 5,311, matching the highs of 2013 and a visual implication of the sector finally getting itself in place to finally recover from the famed banking crisis of 2008/9.

    We remain a little sceptical, thanks to 15 years of false dawns across the prices of retail bank shares and, to be honest, we’d never expected to find ourselves with sufficient justification to write the previous sentence.

    banks120223.jpg

    Source: Trends and Targets. Past performance is not a guide to future performance.

    Lloyds Bank

    If we accept the foregoing as gospel, it appears to be the case Lloyds Banking Group (LSE:LLOY) intends to head upward but, so far, it is painfully slow. Perhaps it shall be the case that any wider market optimism, due to the current US series of earnings reports, shall polish Lloyds speed of movement.

    It’s certainly frustrating, with Lloyds share price experiencing just 4.3p of movements during the most recent month. We’ve been awaiting an attempt at the 56p level but despite all boxes being ticked, the highest Lloyds has achieved (so far) has been just 54.33p.

    It is now the case above 53.33p calculates with the potential of gains to 56.5p next with our secondary, if such a level is exceeded, now calculating at 62.8p. We still suspect some hesitation at such a secondary level, especially as it matches the share price high pre-pandemic!

    But importantly, it’s now the case that share price closure above 56.5p should allow us to mention a future 72p with secondary, now a longer-term 110p.

    lloy130223.jpg

    Source: Trends and Targets. Past performance is not a guide to future performance.

    Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

    Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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