Interactive Investor

NatWest shares and the odds of further upside

UK retail banks have been leading the FTSE 100 rally to record highs, but what does independent analyst Alistair Strang think about this popular lender?

8th May 2024 07:34

by Alistair Strang from Trends and Targets

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    Sometimes the market does things we simply can neither understand nor justify.

    NatWest Group (LSE:NWG) just pulled off one of these stunts, as when we reviewed the share three weeks ago we suggested above 281p should next target 295p with secondary, if bettered, a ‘game changing’ 315p.

    These target levels are worthy of a few minutes examination, especially as the gremlins who influence price movements appear to be following the same sheet music as us.

    To explain, the chart immediately below shows something interesting happening on 26 April. NatWest was gapped up to 296p when the market opened, obviously slightly above our immediate target level. In the period that has followed, the share price has trundled up to a high of 317.9p, slightly above our secondary target, but on the day it failed to close above 315p, so we’re not entirely convinced the game has yet changed.


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

    But when we review what actually happened on Tuesday 7th, things get a little interesting as at 2pm NatWest exceeded our 315p, reached a new high by 2.40pm before forcing itself backward at 3.30pm, once again below 315p.

    It spitefully back-tested the 315p level before falling again. From our perspective, the worst thing we should now anticipate is for weakness below 310p promoting the idea of reversal to an initial 303.3p with our secondary, if broken, calculating down at 286.3p and hopefully a bounce capable of taking the share upward properly. But our demand it closes a session above 315p remains intact before booking any expensive holidays.

    There is another visual issue, one we’re not entirely sold on, and it’s the very real danger that the market wakes up one day and decides to Gap the share downward at the open by around 5p for whatever reason they find offends them the most. Any movement such as this risks dangerous consequences. While we shall need to visit a new set of calculations, a Gap Down following a Gap Up usually ends in tears.

    However, there is something important here.

    Theoretically, despite it not yet double underlining the word “optimism” by allowing the share to close a session above 315p, there is an argument we can now present where movement above 318p should target an initial 355p with our longer-term secondary calculating at an amazing 379p.


    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. 

    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.

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