There are some red flags, according to independent analyst Alistair Strang, who gives us his latest chart read on Lloyds shares.
When we previously reviewed Lloyds Banking Group (LSE:LLOY), we moaned about their share price (as always), complaining it had spent three weeks with a 3p trading range. Unsurprisingly, we can recycle our previous comments as the share remains with a foul bandwidth of movements. Rather spitefully, it moved down, into a trading range 3p lower than last time, maintaining its width of range.
Unfortunately, there are now a few red flags giving cause for concern!
Firstly, there’s the red trend line on the chart, dating back to September 2020. The share has broken this uptrend, moving into a position where any excuse for a solid reversal is liable to provoke sharp downward moves.
Secondly, there’s the circled area on the chart below. This particular blip through the uptrend is something we tend to regard as an early warning for trouble. Despite the share price not closing below the uptrend, the market essentially served warning the uptrend dare not be regarded as sacred. It can be broken.
Third, by closing Friday at 43.41p, Lloyds’ share price achieved an official “lower low”, closing the day at a lower level than any time since the trend was broken and also, closing below the early warning level referred to previously.
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When we collate all these troubling signs, it’s easy to conclude the world is about to end for Lloyds, but the reality is probably less dramatic.
Weakness now continuing below 43.2p looks capable of near-term reversals to 41.55p. If broken, our secondary calculates at 38.8p and hopefully a proper bounce.
If the market is serious about giving Lloyds a bit of a kicking, the price could even hit 36p, a level where it’s ‘almost a requirement’ the share rebounds. We’d stress our use of the word ‘almost’ in the previous sentence. At times, it feels like the only real requirement in retail banking shares is for the market to cause the maximum level of pain to private investors.
For things to take a turn for the better with Lloyds Bank, apparently above 45.8p should trigger recovery to an initial 47p, far from the most exciting potential. If bettered, our secondary currently calculates at 50.5p. At this level, it becomes crucial for the share price to close a session above 50p as this should serve notice for some stronger future price recovery.
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.
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