How Taylor Wimpey shares can rebuild from here

Taylor Wimpey had a superb start to 2020 until Covid-19 brought the house crashing down. What now?

Taylor Wimpey (LSE:TW.)

The big question of whether building companies will get restarted properly with lockdown easing, still remains.

An acquaintance in the trade has been experiencing a problem with suppliers, two of whom announced they are not reopening and, instead, opting for liquidation.

Making matters worse, she has been experiencing difficulty sourcing replacement suppliers in Europe and it makes us suspect the building industry is about to face some peculiar times.

Taylor Wimpey (LSE:TW.) had a superb start to 2020 and, up until Covid-19, things were looking especially hopeful for the longer-term.

Suddenly, it all came crashing down, and a share price which had been starting to illustrate over four quid as a reasonable big picture ambition, proved as stable as one of these houses built above decaying cliffs in the South.

From our perspective, matters were made worse by the share price experiencing a GaGa, gap up then gap down, circled on the chart.

This absurd series of price movements is usually quite reliable in allowing us to predict future target levels.

In the case of Taylor Wimpey, the two gaps generated sufficient weakness to attempt an initial 88p with secondary, when broken, at a bottom hopefully at 47p.

None of this has actually happened (yet) as the lowest the price reached was red on the chart, an uptrend since 2008.

We're not inclined to relax just yet as Taylor Wimpey needs to trade above 170p to generate an initial attempt at 183p.

If the share price exceeds 183p, this gives the first indication our GaGa gloom is probably nonsense, shifting the price into a zone where movement above allows a further surge to 183p.

We fear it's more likely that any future break of red, presently 103p, shall now bring reversal to an initial 88p with secondary, when broken, at a bottom hopefully of 47p.

We've painted 20p as "ultimate" bottom on the chart, this being the level we cannot calculate below.

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.