Interactive Investor

Lloyds Bank shares threatened with a thrashing

13th June 2022 07:23

Alistair Strang from Trends and Targets

Lloyds shares reached a multi-week high a few days ago, but were caught up in the late-week sell-off. Independent analyst Alistair Strang gives his view on what might be coming up for the high street bank.

We truly did not anticipate the FTSE 100 hitting our 7,325 drop target on Friday. The 142-point reversal from trigger to target was made doubly worse, thanks to the FTSE closing marginally below our target at 7,317 points. It begs the question, should we anticipate things falling further? Thanks to inflation figures, the markets are behaving really badly and we’re worried for the future.

Lloyds Banking Group (LSE:LLOY) is a case in point. When we reviewed the share price three weeks ago, our simple request of the share price stumbling above just 46.4p to bring happy times has proven quite curious.

The share price has tickled the trigger level a couple of times, yet utterly failed to exceed 46.4p. Instead, it's peaked at 46.2p, perhaps carrying an implication of inherent weakness, and now perhaps Lloyds Bank's share price is setting itself up for a bit of a thrashing.

If this is the case, the wider behaviour of the markets on Friday must surely carry the expectation of those shares with a possible excuse for a hammering to discover an excuse to run themselves into a brick wall anytime soon.

Should this be the case, it’s entirely possible Lloyds shall be about to introduce some potential entry levels.

Currently, for Lloyds Banking Group, below 43p looks troubling, calculating as capable of provoking reversal to an initial 41.4p. There are difficulties in suggesting 41.4p shall be a profitable entry level as such a target also brings a “lower low”. Neither does such an ambition collide with the Red uptrend, making the prospect of a bounce unlikely.

Source: Trends and Targets. Past performance is not a guide to future performance

In the event 41.4p breaks, our secondary is at 38.3p and, again, this is a troubled target level. Obviously it breaks the Red uptrend and, less obviously, it gives the share price an opportunity to close a session below the March levels of the Russia low.

In this instance, we’re inclined to produce a third level drop target, should 38.3p break. Apparently, Lloyds risks a cascade effect and hopefully shall find itself above to bounce at 32.5p. We can also produce an “ultimate bottom” of 26.9p, this representing a level below which we cannot calculate.
On a brighter note, Lloyds still requires to exceed 46.4p to suggest happy days ahead. Unfortunately, we’re starting to suspect the only way Lloyds share price shall grow in value is if the company opt to introduce a “Share Split”, for instance taking back 5 shares and issuing 1 share in their place. This method, to artificially inflate the share price, historically fails to impress the markets and will be unlikely to do investors any favours.

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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