Interactive Investor

Are British American Tobacco shares lighting up?

2nd March 2022 07:26

Alistair Strang from Trends and Targets

Shares in BAT are up by over a quarter since the start of December. Independent analyst Alistair Strang runs the numbers again to chart possible progress over the next few weeks and months.

It was to prove a worthwhile exercise, glancing at how major markets are performing this year. Germany is down 15%, Wall Street down 13%, France down 12%, the S&P down 15%, and the usually dreadful UK market has relaxed from its 2022 high by just 6.5%! As a result, we opted to review another British success story, British American Tobacco (LSE:BATS).

Sticking with the FTSE for a minute, all the other markets had previously strongly exceeded their Covid-19 high, essentially placing themselves at risk of some reversals should a suitable excuse be discovered. On the other hand, the FTSE only flirted briefly with its prior high levels and it still in a “recovery” zone, whereas other markets were in a “growth” zone.

We suspect this is reflected in the FTSE only attaining half the rate of damage to other markets. It’s a strange phenomena, one which we witness all the time with shares, where items which go up fast come down even faster. However, we’re still not ready to start running in circles, declaring “the sky is falling”.

We reviewed BAT last August, giving an upper target at 3,434p and the share cheerfully delivered the target, even managing to close very slightly higher at 3,439p. This creates a new situation, where the largest cigarette company in the world can now present a new growth scenario.

Next above 3,459p should enter a cycle toward an initial 3,746p next. If exceeded, our longer term secondary comes in at 4,188p.

If things intend to go wrong for BATS, the price needs fall below 3,200p as this risks provoking reversal to 2,987p. If broken, our secondary calculation comes along at 2,728p, hopefully a level with an excuse for a solid rebound.

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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