Direct Line shares: the worst may be yet to come
12th January 2023 07:41
by Alistair Strang from Trends and Targets
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After a spectacular crash yesterday, independent analyst Alistair Strang gives his view on possible share price direction.
The news that Direct Line Insurance Group (LSE:DLG) has decided to cancel its share dividend due to “the weather” sounds almost too ridiculous to believe. Apparently the brief cold snap in December caught the company unawares, leading to a surprise increase in car accidents and household insurance claims. It’s ridiculous, because we are in the UK, a place where there’s weather!
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With Direct Line Insurance Group now trading lower than in 2012, we fear the worst is yet to come, as visually the market isn’t terribly impressed with their behaviour. At time of writing, they’re trading around 177p with a low of the day at 162p. And this was after the market manipulated (gapped) the share price down by 50p, all the way from 231p down to 181p in the opening second of trade.
We fear further bad weather may be ahead for DLG as below 162p now calculates with the potential of further leakage down to 111p and hopefully some sort of bounce. Our reasoning behind this comes from the ridiculous secondary target level of 34p, representing a point below which we cannot calculate.
Source: Trends and Targets. Past performance is not a guide to future performance.
To be honest, while we suspect 111p may make an appearance, we’ve substantial doubts regarding our secondary at 34p as visually, nothing appears to back up this calculation, other than a miserable computer program.
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For DLG to escape this threat, their share price needs closure above 235p, currently a pretty impossible looking task.
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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