Interactive Investor

This is the trouble sign for NatWest Group shares

13th December 2021 07:39

Alistair Strang from interactive investor

There's a warning sign for NatWest shares if they hit this level. Independent analyst Alistair Strang also has a look at the bigger picture for the high street bank.

It's a very long way away right now, but for NatWest Group (LSE:NWG), 570p is liable to prove quite an important price level sometime in the future for some incredibly complex and simple reasons.

It’s worth remembering NatWest was once called RBS (or the clown bank by some) and chart packages tend to pretend the share price 10:1 consolidation of 2012 didn’t happen, as it fouls historical data. As pointed out with depressing regularity, the current price of 216p is actually 21.6p, if we admit the 10:1 event took place.

In the financial crisis of 2009, RBS (NatWest) hit 9.7p as a low and, while the low in 2020 of 90p may sound better, the reality is the share price was just 9p in ‘original’ money. To be honest, RBS never shied away from their 10:1 consolidation as being a straightforward exercise, just to make the share sound more respectable as a major member of the FTSE 100.

Unfortunately, our grouch in-house came from the 57p level, a number which is now 570p. When we were designing our software, we used quite a few key players from the market while we explored how many ways we could get things wrong with numbers. RBS was one such company and, by the time the company fiddled with the number of shares in issue, we’d – rather comfortably – identified 57p as an absolutely critical level above which the share was required, before any rising cycle could be taken seriously.

After consolidation, the only thing which changed from a seriously Big Picture perspective was this trigger level became 570p. And as per 10 years ago, the share price has remained more distant from the 570p trigger than a Conservative politician admitting to attending a festive party!

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

Since we previously reviewed NatWest, the market opted to force the Covid-19/Omicron variant reversal, a movement which thus far has failed to stick. In the great scheme of things, we would have expected NatWest to commence a reversal cycle to 186p, something which just has not happened.

Instead, we can see the share price has recovered, once again tickling price levels before the manipulation (market gap) downward.

If our cynical nature is to be confirmed, below 210p looks troubling, calculating with the potential of reversal to 186p with secondary, if broken, at 176p and hopefully some sort of bounce. And alternate scenario, for gains, is rather less certain, requiring above 228p to suggest recovery to 239p with secondary, if bettered, at 253p.

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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