Interactive Investor

Can Zoo Digital shares recover from price collapse?

There's always a high level of risk when investing in AIM shares. Our chartist shares his expertise.

27th March 2019 09:36

Alistair Strang from Trends and Targets

There's always a high level of risk when investing in AIM shares, demonstrated by this former small-cap star. Our chartist shares his expertise.

Zoo Digital

There is always the temptation to try and pick the bottom with shares and Zoo Digital (LSE:ZOO), presently, is flirting with some very real danger.

At time of writing, the share is trading around 46.75p. From our perspective, it dare not break below 45.5p as this risks uncovering a painful scab, a move with greater potential for self harm than we'd expect.

For the purposes of certainty (or as close to such as the market allows) we shall demand closure below 45.5p as providing breakage of the final straw but, to be realistic, alarm bells would now ring if this trades an iota below 45.5p.

The danger?

Such a calamity enters a cycle toward an initial 18p and, hopefully, a bounce with some integrity. If broken, our secondary calculates at a bottom of 2.6p, something which is visually absurd despite being mathematically possible.

It is vanishingly rare for us to propose a price reversal to 1/20th of current and we're not comfortable doing so. But there's little doubt the share requires above 64p just to regain the immediate uptrend – or above 82p to regain the "real" uptrend.

If it intends a bounce rather than break the 45.5p, a rebound exceeding 64p should prove capable of an initial 86p, along with some visual safety. If bettered, secondary calculates at 101p.

It's worth watching but, as with any other share, it has dangers.

Our reason for mentioning this one is fairly silly. Sometimes, the market appears to notice a share price skirting the edge of catastrophe and reacts, extremely positively, to move the share from danger. Perhaps some research will make sense.

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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