Interactive Investor

Are NatWest's pandemic recovery gains at risk?

24th January 2022 07:39

Alistair Strang from Trends and Targets

Bank shares outpaced the market on the way up recently, and it's the same on the way down. Analyst Alistair Strang gives his view on the potentials for this high street lender. 

The final week of January always tends to prove quite traumatic. Historically, we’d felt it was either the Economic Forum in Davos (May this year) or the proximity of the Chinese New Year (1 Feb). On occasion, China has made some sort of announcement which impacts negatively on the world, then closes its own stock market for the New Year holiday in the hope the dust settles for their return.

But this year, the trauma has started a few days early and lots of commentators are running around in ‘headless chicken’ mode, predicting the worst for the markets. We’re not entirely convinced, despite some traumatic reversals on Friday.

Did anyone notice FTSE Futures closed the week at 7,421 points at 9pm on Friday? This was exactly the level we’d proposed a bounce from in our ‘FTSE for Friday’ article.

Unfortunately, we’re no longer quite as confident, thanks to FTSE Futures opening for the coming week, gapped down by a further 15 points. This provokes some suspicion the reversals may not be quite finished yet, but when we review shares, a heck of a lot of them are running out of steam for drops, instead approaching levels where some bounces can be hoped.

NatWest Group (LSE:NWG) is in such a position, the immediate picture suggesting weakness below 237p risks near-term weakness down to an initial 234p with secondary, if broken, at 231p and hopefully a real bounce.

Things certainly risk becoming problematic with any break below 231p as our next best hope is loitering at 215p, matching the level of the trendbreak through Blue, a line which dates back 15 years in time.

For now, we remain optimistic thanks to NatWest's share price doing many of the right things. Overall, despite near terms downs and ups, the share is trading in a region where 261p shows as the next major point of interest in a path which leads to 330p hopefully.

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

The bank needs to reverse below 215p to promote a bout of navel gazing as the consequences could become pretty unpleasant, destroying our calculations for 330p, and instead ticking the first box in a cycle which could end at 160p.

Visually, none of this makes any sense currently, but we must remember that NatWest is a retail bank and very little about retail bank share movements made sense until very recently.

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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