Interactive Investor

Lloyds is still in ‘misery mode’

16th August 2021 09:54

Alistair Strang from Trends and Targets

Our expert outlines what the share price chart can tell us about the retail bank.

When we gave careful consideration to the future of Lloyds Banking Group (LSE:LLOY) three weeks ago, we truly didn't anticipate nothing happening. Alas, the share has enjoyed playing around within a 3p trading range.

It was at 45.9 when we wrote our analysis and, at time of writing, it's at 46.23p. Surely the share price shall eventually make some sort of decision about its future?

After all, the company recently dusted down a shiny new CEO, a bloke called Mr Charlie Nunn and he's expected to turn the dial up to 11 when he stops playing with the levers on his new seat behind the doubtless big desk in his office.

From reading his historical background, things look fairly encouraging, once one chooses to ignore his boast of being a keen cyclist... By all means, ride a bike but folk who broadcast the feat risk being tainted with a faint whiff of the fanatic.

For the banking sector, a return to banks being allowed to set their own dividends without constraint, the body pleading for an easing of capital restraints, business now returning to the new normal, along with some (slight) optimism for the future, perhaps we're due a change in the share price fortunes.

Of course, we remain with a slight worry as mentioned previously, thanks to the share giving early warning of a plunge potential to 32p.

Our worry of a dramatic reversal remain, the intervening three weeks doing absolutely nothing to reduce our fears. In fact, the mantra of "if it ain't going up, it's going down!" may apply, thanks to ongoing lethargic movement.

At odds with our doom and gloom, the Banking Sector Index, helpfully renamed as the NMX301010 (for reasons we just don't get) is showing early signs of a growth cycle to 3625 points, challenging the market high pre-Covid.

All it needs do is exceed 2945 points to confirm our calculations as this should kick things off. At present, this index is trading at 2900 points, requiring little work improve its future potentials.

However, we shall opt to remain in "misery mode". With Lloyds trading at 46.2p currently, the price now only needs slither below 43.3p to indicate trauma ahead as this now calculates with an initial target of 39p. If broken, our secondary and bounce level with strong potential still works out at 32p.

Conversely, to indicate happier days ahead, the share price need only exceed 48.3p as this should allegedly trigger recovery toward an initial 50p with secondary, if bettered, a significant 53.75p. We regard this as deserving of "significant", due to such a target exceeding the previous high, giving a strong potential for happier times in the longer term future.

For now, we fear it intends 32p and is just awaiting the right excuse for a plunge. Hopefully the new boss doesn't have a dodgy hydraulic canister in his new chair.

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.