Here's where the charts say Pendragon shares are heading

After a grim profits warning, does our chartist see any hope for this bombed-out car dealer?

Pendragon PLC (LSE:PDG) 

It's worrying, how often we find ourselves examining shares with a view to decide "is it cheap yet?" The latest candidate, Pendragon (LSE:PDG), thankfully does not require the Wheeler Dealers treatment to make our mind up.

In fact, a glance at the chart since 2009 should give sufficient warning.

It's a bit surprising seeing one of the stars of the motor trade appear on the naughty step. Given low interest rates, along with massive improvements in fuel economy, we'd assumed cars were virtually driving themselves out of the showrooms.

Similarly, the plethora of new vehicles cluttering up traffic jams appears to confirm someone, somewhere, is selling a lot of cars and, presumably, making a profit from it. However, there's nothing quite like a profit warning to utterly foul a share price.

• Why Pendragon shares just plummeted

As the chart illustrates pretty clearly, the uptrend since 2009 has now been broken with the price forced below.

It's pretty unlikely it has seen bottom on the first surge, instead appearing  to suggest weakness now below 16.5p will prove capable of reversal to 13.5p and hopefully, a rebound.

There are some quite extreme implications should the 13.5p level break as there's the risk of freefall down to a longer term 4.70p.

Visually, along with experience, tends to suggest some sort of rebound by the 13.5p level but whether it lasts will greatly depend on if 13.5p breaks.

To give the impression this has all been a dreadful mistake, the share price needs to reclaim red which indicates at 22.5p presently.

If we accept the market has just indicated a new trend is commencing, we're not holding our breath for such a signal anytime soon.

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.