Dixons Carphone shares could continue rally if this happens

After a strong couple of months, our chartist studies the tea leaves at this electricals retailer.

Once again, it's that time of the year when we must remember neither Santa nor politicians oaths are real. 

We last covered Dixons Carphone (LSE:DC.) a year ago and their price movements now appear to suggest a surprising change in mood. 

The share price need only trade above 140p to enter a cycle which suggests some coming recovery toward an initial 159p. If exceeded, secondary calculates at a rather impressive, if visually questionable, 210p. 

Our excuse for questioning such a target level is fairly simple. For some reason, targets which sit halfway in the middle of a gapped down (manipulated) region rarely turn out to be correct. 

We've no idea why this is the case but, over the years, we've learned to take such ambitions with a pinch of salt. In the case of Dixons, we suspect any rise which does exceed 159p is liable to fizzle out around the 188p level, as the force of the gap down in May of last year looks capable of throttling a rise.

Our previous review of Dixons had given a drop target at 110p, something obviously achieved. Our secondary had a question mark over it as the calculation gave 55p as "bottom". As this was precisely half of our initial target, it didn't ring true. 

Instead, despite a break of 110p, the lowest achieved since was 89p, and the market appears to be making an effort to recover the price. At present, anything which gave Dixons share price an excuse to fall again below 110p will not be perfectly capable of 55p as "bottom" eventually. The visuals do not suggest this is likely.

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.