An energy stock burning bright
15th August 2018 10:20
by Alistair Strang from Trends and Targets
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The recovery at this high-profile energy stock has prompted chartist Alistair Strang to consider where the mid-cap company's shares may go next.
Drax (LSE:DRX)
We've a soft spot for Drax Group. Towards the end of 2014, we were trying hard to get a contract from a large hedge fund. Our calculations showed the share price was heading to an initial 400p, maybe even 200p if it went wrong.
The manager at the hedge fund was quite vocal in disagreement. It transpired Drax was one of his "specialist subjects" and there was absolutely no way it was going to drop.
That particular hedge fund shut down, in fairness echoing the behaviour of many who vanished during 2016 and 17 in what became known as the Bonfire of The Hedge Funds. As far as we're aware, we still do not have contracts with any hedge funds...
However, if hedge fund folk are reading, Drax is starting to stir with the immediate situation suggesting closure above 373p, signalling the start of a recovery phase to an initial 403p.
We'd suspect some stutters around such a level, given this matches a period of highs last time the 400p level was troubled.
Essentially, a bunch of folk are almost certainly going to sell once the price returns to break even. Of greater interest for the longer term is our secondary, if 403p is bettered, as 564p calculates as a worthwhile ambition.
At present, if it all intends to go wrong for Drax, the price needs to break below 295p as this looks capable of triggering reversal to a trend testing 220p. Crucially, if broken, the bottom looks like 164p.
Source: interactive investor 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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