SSE shares and some upside potential

The market has been behaving quite strangely this year and there’s a surprising underlying bias about a majority of share price movements. Basically, at first glance, it’s pretty difficult to avoid awarding a mental “buy” against rather a lot of stocks.

For instance, a quick scan of the top 30 shares traded on Monday revealed just four as “we don’t have a clue”, 24 as “probably a buy” and just two as “this almost must go up”.

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This is a set of results we’re not used to seeing, generally the criteria we use tending to give a 50:50 result between “buy” and “sell” results. Our rules are, from our perspective, fairly simple. We review price movements over the prior 50 days and apply our target arguments. Those shares regularly breaking drop targets are awarded a “sell” bias, whereas those regularly exceeding gain arguments are viewed rather more positively.

We notice analysts are rating SSE (LSE:SSE) as a “strong buy”, but we’re inclined to be slightly less enthusiastic. For us to generate such an opinion, the share price would require to exceed an immediate downtrend and also be painting “higher highs”, something SSE is conspicuously avoiding. Market analysts use different criteria than ours, focussing on fundamentals, while our own style is to judge what the market looks like doing.

Thankfully, our track record with this approach is self evident.

And so, while some grown-ups rate SSE as a strong buy, our inclination is to rate is as a possible buy. We note the recent spike to 1,697p was encouraging, especially as our in-house logic “only” pointed to 1,677p.

With it once again exceeding a gain target, we felt safe pinning the appropriate badge on the company. However, at time of writing, the share price needs better than 1,777.685p to exceed the immediate Blue downtrend and give considerable hope for the longer term. Above 1,777p calculates with the potential of a lift to an initial 1,816p with our longer-term secondary, if beaten, at 1,935p.

If things intend to go wrong for SSE, their share price needs to fall below 1,547p to provoke some panic as this looks capable of triggering reversal down to an initial 1,467p with our secondary, if broken, at a hopeful bottom of 1,315p. One final detail is perhaps worthy of mention.

From viewing the SSE chart, along with the plethora of buy signals, it becomes probable an undercurrent of optimism is liable to start pushing the FTSE 100 upward, finally breaking from of the hiatus since 2021 we constantly moan about!

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