Are bombed-out Elementis shares about to bounce?

by Alistair Strang from Trends and Targets |

After taking a hit from a profits warning, our chartist sees if Elementis is worth backing.

Elementis Plc (LSE:ELM) 

World famous for their Hectorite Clay, along with other famous products we've never heard of, we've received a few emails regarding Elementis' (LSE:ELM) share price potentials.

A greasy, white, clay, used in cosmetics, it was named after the town/junction of Hector, California, where it was discovered in 1941.

Now we know more about Hectorite than we needed, how's the share price doing?
 
At present, it's hovering on the edge of trouble, with closure below 133p indicating coming reversal to an initial 111p with secondary, if broken, at 103p.

Visually, there appears ample reason to hope for a rebound at such a level. Not least amongst the reasons will be folk reviewing the low of 2011, believing the price must bounce at such a point and executing a buy order, thus creating a self-fulfilling scenario.

The other reasons to hope for a bounce, if the 111p/103p levels appear, comes from our secondary calculation.

Below 103p takes the share price into a region where ultimate bottom calculates at 39p, this being a level we cannot comfortably calculate below.

Invariably, when there is such a massive gap between an immediate target and "bottom", any immediate target tends to provoke a reasonable level of recoil.

The immediate situation is fairly interesting. Regardless of whether we draw a red line mapping the "low of day" or "closing price", the share almost perfectly hit the uptrend since 2009 and has refused to break it.

Perhaps this indicates a bounce is due and, if this is the case, above 144p allegedly should bring travel to an initial useless 148p.

If exceeded, our secondary calculates at 165p and visually will suggest the recent circled drop was overdone. It is fairly unusual for the market to admit such an error unless some miracle news surfaces for a share.

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, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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