Interactive Investor

Chart analysis: Barclays shares and the Chinese yuan

4th October 2021 08:24

Alistair Strang from Trends and Targets

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Independent technical analyst Alistair Strang studies the charts for the popular high street bank, plus the Chinese currency.

Sometimes it feels like the market is deliberately spiteful. Three weeks ago, we opted to restrict our Barclays (LSE:BARC) coverage to a single sentence, demanding the price needed to go below 174p for concern. Ten days later, it teased by bouncing from 174.26p, crucially not breaking the trigger, and doing very little since.

Given the care taken by the market to avoid the 174p level, it appears certain our sums were correct.

While below 174p remains problematic, still pointing at a bottom of 167p with secondary, if broken, down at 155p, we’re inclined toward some hope.

Firstly, the price is trading above its pre-pandemic high.

Secondly, the price is trading above the downtrend since 2013.

Third, it very studiously failed to break our drop trigger level. So, it’s officially fingers crossed time!

Presently trading around 188p, the share only need better 192p to trigger gains in the direction of 198.7p. If bettered, our secondary (longer-term or within a day or two!) calculates at 216p. The important thing about such a movement is it places the price firmly in a region where 240p becomes a Big Picture point of interest.

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

Chinese yuan vs UK sterling

We’ve never covered this before, and a glance at the pairing's behaviour since 2016 probably explains why.

In terms of currency relationships, the picture is pretty calm and boring, stability doubtless a good thing given the quantity of goods bought from China.

There are early signs illustrating the potential for coming weakness, essentially suggesting traffic below 8.73 risks GBP weakening down to 8.50. If broken, as looks possible, our secondary (and hopefully bouncy bottom) calculates at 8.09.

While we suspect weakness to be coming, there’s a fairly straightforward test required to ‘prove’ if the GB pound is strengthening against the yuan.

At time of writing, the pair is around 8.735, needing above just 9.06 to trigger movement to an initial 9.253. Our secondary for the longer term, if bettered, works out at 9.620.

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. 

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 to buy or sell any financial instrument or product, or to adopt any investment strategy as it 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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