Interactive Investor

Barclays shares and the UK banking sector

10th January 2022 07:26

Alistair Strang from Trends and Targets

With the shares currently trading at their highest since 2018, independent analyst Alistair Strang reveals his take on the high street lender and the broader banking index.

When we previously reviewed Barclays (LSE:BARC) just over a month ago, we wound up our report by mentioning we believe the share price intended a visit to 217p. However, in a month quite a lot can change, though perhaps quite a little, rather than quite a lot, when discussing the UK’s retail banking sector!

However, a glance at the FTSE 350 Banks Index, memorably named the FTSE:NMX301010, actually gives reasonable cause for hope.

The sector has accelerated through the Blue downtrend since 2018 and is now illustrating a series of highs. As a result, the immediate situation is encouraging, as movement above 3,308 points now allows for further recovery to 3,426 points with secondary, if bettered, at 3,673 points.

The secondary clashes quite neatly with the pre-Covid high in February 2020 and we suspect, if attained, represents a level at which we should expect some hesitation in the banking sector.

Things only become interesting for the longer term with closure above 3,673 points as a strong argument can be made for ongoing travel to 4,448 points.

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

What has this to do with Barclays Plc?

Essentially, when the banking sector as a whole develops some slight angst around the 3,400 level, whatever price level Barclays finds itself languishing at, is also doubtless going to prove itself capable of some hesitation.

In the case of Barclays, we’re a little conflicted thanks to a couple of variable arguments.

Near term, above 207.5p should now make an attempt at 218p next. We’re already pretty certain the bank share price intends a visit to this level.

Closure above 218p should prove interesting, allowing a visit to a future 240p. It’s the 240p level we suspect shall prove capable of some grief, probably matching our ambition of 3,673 or so for the Banking Sector.

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

Visually, Barclays' share price has quite a lot going for it currently, already trading higher than the pre-pandemic high and now painting a series of “higher highs” on the chart below.

If things intend to go pear shaped, the bank currently needs to trade below 175p to generate a serious level of concern. Our inclination is to remain viewing Barclays favourably, at least until 240p makes an appearance. Goodness knows how long it may take!

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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