Fevertree: Should you buy the correction or listen to alarm bells?
24th October 2018 09:13
by Alistair Strang from Trends and Targets
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This AIM giant's share price has started to lose its fizz as investors worry about wider economic problems. Chartist Alistair Strang reveals what could happen next.
Fevertree (LSE:FEVR)
Last time we reviewed Fevertree a year ago, we were quite optimistic regarding its future price potentials. Thankfully, our predictions proved accurate, eventually exceeded quite nicely too. This time around, we're rather less confident and it's all to do with a single price motion.
Circled on the chart, on 11 October, the share price dropped to 2,463p. To us, this immediately rung an alarm bell as it broke the extremely well defined uptrend since June 2016.
When this sort of thing happens, it can often be worth paying close attention as the market just proved a perfect uptrend can be broken. Despite the share price not closing below red, it's a warning signal, one we'd be daft to ignore.
At present, the share price is trading at around 2,675p, once again threatening red. Some fairly controlled panic appears possible should it now manage below 2,590p as reversal to 2,226p calculates as possible. If broken, secondary comes in at 1,854p.
Around the 1,854p point, things get a little scary. While visually it's almost promised any drop should bounce at such a point, the longer-term implication is quite nasty, should 1,854p break. Any scenario including this gives ultimate bottom at 1,073p!
When we give "ultimate bottoms" as part of any big picture analysis, they are only "ultimate" because we cannot calculate anything sane below such a point. It gives a reasonable expectation of a bounce, should any "ultimate" level make an appearance. At present, absolutely nothing related to this share price gives such a threat, just a Halloween scary moment on 11 October.
Oddly, the price does exhibit a manipulation gap from around the 11 quid level back in January 2017 (shown with a green box). If anyone fancies a gap covering exercise against the price, reversal to 1,073p would certainly cover the evidence and balance the books...
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.
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