Inchcape shares: here’s why this analyst feels bearish

by Alistair Strang from Trends and Targets |

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Like many industries, the car dealership industry is struggling. Our chartist shares his views.

Inchcape Plc (LSE:INCH) 

The household menagerie sometimes gives surprising inspiration. Living in the country, it's been easy to become immune to the dogs chasing (and never catching) deer, pheasant, squirrel, fish and frogs, and the black cat. 

But what happens, when one of the dogs finds an animal which doesn't run away? For 90 minutes, from 2 am, a Golden Retriever panic barked in the forest behind the house, evading all forms of bribery as we attempted to capture her. 

A hedgehog had curled into a ball, opting to ignore everything going on. That hedgehog gave pause for thought. A beast which didn't run away, just weathered the storm? Quite a few shares have been exhibiting such behaviour since the pandemic price drop in March.

Inchcape (LSE:INCH) doubtlessly will be experiencing a year not worth remembering, yet its share price movements in the last seven months have not proved noteworthy, instead the price emulating the hedgehog. 

Their UK operations will doubtlessly be experiencing identical trauma to the rest of the industry and, unfortunately, it's likely their operations in the other 31 countries in which they've a presence will be experiencing similar vile market conditions. We're inclined to anticipate the worst for Inchcape.

Visually, there's a strong implication of weakness next below 400p forcing reversal to an initial 265p with secondary, if (when) broken at a bottom of 62p in the longer-term. 

To be blunt, the price is already trading in such frigid territory and we wonder if their results this November shall provoke a swift reversal. 

Already, we've two quite distinct arguments favouring 265p as some sort of bounce level but we'd warn, should the price manage below such a level, there's an enhanced risk of future reversals until the lows of 2009 are again challenged at an ultimate bottom at the 62p level.

Only in the event of Inchcape exceeding 570p shall we feel any recovery may be genuine as this allows for surprise moves to an initial 677p with secondary, if exceeded, at 784p. We lack optimism.

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, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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