Interactive Investor

Kingfisher: is the B&Q owner finally out of the woods?

Our chartist called Kingfisher's crash correctly. Here's what he thinks this time around.

8th July 2020 08:51

Alistair Strang from Trends and Targets

Our chartist called Kingfisher's crash correctly. Here's what he thinks this time around.

Kingfisher (LSE:KGF) 

Our January review of B&Q owner, Kingfisher (LSE:KGF), finished with the paragraph below.

"That's about the end of any positive spin on this story as we're nervous at the slavish attention being paid to the downtrend since 2018. It has created the situation, where weakness now below the trend (208p presently) signals the prospect of reversal to an initial 197p with secondary, when broken, down at 175p. The secondary level scares us more than a modern WC as it takes the price into a region with 141p as 'bottom'."

Obviously this was before "it hit the fan" but proved prescient, the share price eventually closing at 132p. We now see an important bounce fuelled by similar enthusiasm to those who'd been desperate for the stores to reopen.

There's a degree of personal favouritism for B&Q, thanks to our choices here in Argyll, Scotland, limited to a few builders merchants who really prefer serving folk who drive white Transits, grudgingly supplying a single sheet of plasterboard and mainly stocking wood which comes in 4.8 metre lengths.

As a result, any trip to the mainland will often include some sort of excuse for a B&Q visit to pick up bits and pieces.

So yes, B&Q opening again was a pretty big deal and now seems to be reflected in their surprising share price movements.

This is actually quite a big deal as very few share prices have yet bettered the level attained before the Covid drop, but Kingfisher has achieved this miracle.

If we regard the Covid-19 reversal as commencing at 221p on 20 February, the price is now at 225p and marginally in 'safe' territory for future recovery.

Price movements next exceeding 230p should prove capable of a lunge toward an initial 241p with secondary, if exceeded, calculating at a more enthusiastic 277p.

Perhaps more importantly, with price closure above 241p, we shall regard the longer-term influence as coming from 355p.

Visually, this makes quite a lot of sense as there's some sort of glass ceiling awaiting at such a level, a flat trend which has formed since 2015. However, we're in uncertain times and we'd be foolish if we refused to look for danger levels.

Against Kingfisher, the red uptrend since 2009 certainly supplies pause for thought, suggesting weakness below 193p could be problematic as it allows reversal to an initial 160p.

If broken, our secondary calculation provides for a bottom at 102p, a price level we'd normally regard as absurd were it not for the intraday opening second plunge on March 20th.

This time around, our final paragraph on Kingfisher from January looks pretty unlikely as it feels the market wants this share price to recover.

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. 

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. 

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 to buy or sell any financial instrument or product, or to adopt any investment strategy as it 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.