What will another lockdown mean for Brent crude and Lloyds?

Independent analyst Alistair Strang considers what could occur while governments agonise over whether to effectively cancel Christmas.

The coming week looks quite dreadful, thanks to the advent calendar on my desk showing only five more windows from which it will dispense little miserable chunks of chocolate. 

One hitherto unknown facet of this item is a revelation that I'm a complete chocolate addict. The normal office routine is to turn on the espresso machine, turn on the computers, grind some coffee beans, etc. Now, it's a rush to the calendar to scoff a fragment of chocolate. Perhaps the reason is that I generally only allow myself confectionary on Christmas Day, my waistline's best friend, a chocolate orange.

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I've just five chocolate treats left for the coming week, the market in London closing at 12.30pm on Friday for what will be quite a decent break, due to Monday and Tuesday being allocated holiday status owing to Christmas falling on the weekend. It's easy to wonder if I will deserve a second chocolate orange on the Monday, a sort of Christmas Day in lieu excuse.

Our previous report on Brent three weeks ago came to fruition. The black stuff opted to reverse and break our $68 initial target level. The break, or rather, the force of the break down to a surprise $65 tends to suggest the markets are taking the threat of further lockdowns quite seriously. As a result, we are inclined to expect the worst in the week again, while governments agonise over whether to effectively cancel Christmas. Of course, it's doubtful that the UK could 'get away' with such a wheeze, given photographs at the weekend of a wine and cheese gathering at Downing Street in May 2020. But with Germany and France already opting to restrict travel from the UK, maybe the damage has already been done. Again.

If this results in a panic set of lockdown rules, the knock-on effect across the markets is liable to prove quite spectacular.

Now below $68 calculates with the triggering possibility of Brent crude heading down to $60.76 initially. In the event such a level breaks, our secondary (and hopefully bottom) works out at $43.62. Should such weakness trigger, the tightest stop is impossibly wide at $77.

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

As for Lloyds (LSE:LLOY), we can be brief. Our criteria three weeks ago proposed an argument for reversal to 44.6p. This level was achieved and even broken. As a result, we are inclined towards a degree of misery in speculating what's coming next. The price now needs to break 44.3p to trigger reversal to an initial 43.16p with secondary, if (or rather when) broken at a bottom of 40.3p.

Overall, Lloyds share price is now trading in a region where we calculate an ultimate bottom of 32p has become possible. It's probably important to view the inset on the chart below. The upper inset with candles shows the share price appears to exceed the immediate red uptrend. The lower inset, the closing price, shows the market took exquisite care to avoid the price closing a session in safety.

As a result, we suspect the markets are just waiting for a lockdown announcement to provoke sharp reversals. Lloyds now requires to trade above 48p to aim for any sort of safety.

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