Lloyds Bank shares: Light at the end of the tunnel
Shares are down 15% from the post-election peak, but this analyst believes it’s not all doom and gloom.
27th January 2020 09:21
by Alistair Strang from Trends and Targets
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Shares are down 15% from the post-election peak, but this analyst believes it’s not all doom and gloom.
Lloyds Banking Group (LSE:LLOY) shares have been displaying their very own idea of what hell is, the price breaking above its downtrend since 2009 in December only to break below the trend again at the start of this year.
When we last ran the numbers against Lloyds, we’d proposed a scenario with weakness possible from 62p down to 58p. Unfortunately, on January 15th when it first troubled this target level, it also broke the target briefly. This means we need explore further drop possibilities.
- Lloyds Bank shares: Are they really on track to hit 85p?
- Outlook for Lloyds Banking Group shares in 2020
By any standards, Lloyds has gotten dodgy, and weakness now below 57p suggests the possibility of travel further downhill to an initial 51p. If broken, secondary is at 48p and we’d hope for a panic bounce, if this level actually makes an appearance.
Our reasoning behind the “panic” hope comes from the lows of last year. If Lloyds actually were to break below 48p, it enters a land more painful than a shoe shop with an open plan section selling scented candles. In plain English, 33p becomes best hope, but we’d really need review the tea leaves if 48p were to now break.
However, and this is a biggie, we were fascinated at the respect paid to the downtrend since 2009. It became clear, very clear, this is an important level to the marketplace.
This being the case, something worth considering is what happens (usually) when a long-term downtrend is rejoined following a break. Invariably, a share price will rise strongly, essentially going everywhere it should have gone in the first place.
In the case of Lloyds, the implication is of movement now above 62.6p should have an ambition of an initial 68p with secondary, if bettered, at 74p. In fact, if earth-shaking news is involved, the price could simply accelerate to 85p.
And best of all?
If opening a long position, any stop loss should be as tight as possible. This sort of movement tends be rather fast.
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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