The future for easyJet, plus a stock market theory

Independent analyst Alistair Strang shares his theory on stock market performance and also issues an update for easyJet.

There’s a constant rumble in the media suggesting market reversals are upon us, but the table below illuminates something quite odd.

Taking the Nasdaq tech index as a case in point, from 2020’s pre-pandemic high, it rose from 9,740 points up to 16,740 points, an impressive rise of 41%. But since the start of 2022, it has fallen to a recent low of 10,970 points, -33% from this years high.

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We’ve a sneaking suspicion indices are all intending to settle around their pre-pandemic level, perhaps making an attempt at some stability.

It was interesting that the Dow Jones on Monday 3 October celebrated being up 22% since 2020, then down 22% from its high, and experienced a day with gains sometimes over 3%. The market is now marginally below the pre-pandemic level (29,550 points) and we’re curious if we’re about to witness some surprise gains on some markets.

Obviously, the Euro Stoxx 50 is a bit of an outlier in this theory, as is the FTSE 100 but, for the FTSE, we’ve got local politicians attempting to destroy the country while they enact their versions of “a cunning plan”.

The above is certainly food for thought. We believe, should the Dow exceed 30,050 points anytime soon, threats of market collapse shall prove unfounded.

Giving easyJet shares a safety check

As for easyJet (LSE:EZJ), when we last reviewed the share price, we’d provided a drop target level at 334p. The share decided to play fair, dropping to our target level and successfully respecting it for a few months until mid-September, when on the 22nd of the month, the share was literally gapped down below our 334p level.

This tended to prove we’d been monitoring the correct trend but made us wonder what the market was up to. Our secondary, below 334p, had been given as a silly looking 38p, a target we still have considerable difficulty in taking seriously.

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If our suspicion is correct from our examination of market numbers above, perhaps easyJet may be due a surprise era of price recovery. The immediate situation calculates with the potential of weakness below 277p being capable of 262p and hopefully a bounce. But we do need to concede the share price is trading in a region where ultimate bottom remains at our silly 38p.

Past performance is not a guide to future performance 

Examining the other side of the coin, if a surprise recovery is indeed on the cards, above 292p theoretically should provoke an attempt at 319p initially with secondary, if bettered, a rather more encouraging 355p, along with a heightened visual chance of some hesitation.

We’d certainly wish to revisit the numbers at such a level, easyJet needing share price closure above 355p to suggest game changing longer term potentials.