These UK bank shares could bounce 20% from tragic target levels
9th October 2018 08:38
by Alistair Strang from Trends and Targets
Share on
The financial crisis was a decade ago, but much of the sector still looks in bad shape. Chartist Alistair Strang discusses the future for retail bank share prices.
Despite our in-house optimist suspecting Brexit will prove useful for the country's future, we're really struggling with the UK's retail banks.
Unlike retail petrol station shops, they've tried about every trick in the book and according to logical trend progression, a pretty grim future threatens retail bank share prices.
We're quite literally confounded by Lloyds Banking Group now signalling the potential of 5p as a share price bottom, a prediction we're the first to admit as absurd.
- Should you follow Neil Woodford and sell Lloyds Bank shares?
- Lloyds Bank and Schroders' wealth tie-up highlights attractive entry point
After all, computers literally don't know a thing... they just follow program trends!
The big questions are; will Barclays hit 70p, will Lloyds hit 5p, will RBS hit 212p? Will the banking sector index permit this?
NMX8350 is the sexy designation given to one of the worlds most important indices - the FTSE 350 Banks index - and, at present, it's looking pretty grotty.
Weakness below 3,960 (at time of writing, trading at 3,965) allows travel to an initial 3,696 points. Secondary if (when) broken calculates as a bottom of 3,236 points.
Quite amazingly, the secondary target matches the uptrend, sometime around the start of July 2019, which is essentially when Brexit hits the fan. As a result, 3,236 is liable to become a pretty important number.
What this means for the retail banks is fairly simple. Rather than our dire calculations, a drop such as this indicates somewhere around 230p as a bounce point on RBS, Barclays a touch more confusing at 140p, and Lloyds calling it quits around 32p. If this indeed proves the case, will share prices landing on a pile of pink elephants actually bounce?
If our retail "good shake up" analogy proves correct, probably yes. But we'd tend to expect any initial 20% bounce from these tragic target levels to prove short-lived as the market will demand reality worth a glance for the longer term.
And to mention the converse, NMX8350 requires to better blue (4,330 at time of writing) as this would confirm we've wasted your time reading this. You can do a Banksy and shred the article!
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.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.