Interactive Investor

Is now the time to buy RBS shares?

RBS's shares have taken a battering in recent months. Our chartist sees if recovery is on the cards.

27th May 2020 09:41

Alistair Strang from Trends and Targets

RBS's shares have taken a battering in recent months. Our chartist sees if recovery is on the cards.

Royal Bank of Scotland (LSE:RBS) 

 RBS's (LSE:RBS) share price is giving a completely solid impression the lowest it is going to go is 100p and doubtless presenting an attractive proposition for traders.
 
Since coronavirus hit, RBS has carefully caressed 100p, crucially not breaking below this level.
 
Visually, it is almost like the stock market is presenting a sure thing.
 
To focus on the dangerous side of life, it now looks possible if RBS's share price shuffles below 100p, reversal to an initial 89p looks possible.
 
Should the 89p level break on the day of an initial surge downward, ultimate bottom calculates at 50p.
 
This is the level we cannot calculate below, thus we would ideally hope for a rebound before such a target level is reached.
 
Our reasoning for this is fairly brutal, as should this theoretical 50p be broken meaningful recovery becomes very difficult.
 
Of course, there is a "however" thanks to the current period of lethargic behaviour.

Should the stock market decide to employ its sense of humour, we shall not be aghast to see RBS’s share price spiked downward below the 100p level in the opening second of trade, if the market discovers sufficient excuse.
 
Ideally, were the price to hit (or come close to) the 89p level at the open, we'd take this as warning the share is intended to enact some real recovery, even though it breaks below the 100p 'floor' level.
 
Our theory why this sort of nonsense may be possible is based on the premise the stock market is not a charity and instead is in business to make money.
 
So imagine a share where loads of 'smart' traders have been viewing price movements, convincing themselves 100p shall not break. But to be safe, they have perhaps established a stop-loss just below the 100p level.
 
If the market felt an upward surge was possible, dropping the price to collect all the stop-losses makes some sense as it also releases a tranche of shares into the hands of stock brokers.
 
Of course, we can present a scenario which does not need to delve into the realms of what sounds like a conspiracy theory.
 
Near-term, movements above just 113p are supposed to be capable of an initial 119p.
 
If exceeded, our secondary longer-term target calculates at 133p, along with a requirement we again stir the tea leaves.
 
Visually, 123p is believable and matches the glass ceiling formed in recent months. Only with closure above 123p dare we express real hope we have seen the worst RBS can inflict on traders.

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. 

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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