This is where Debenhams shares should bottom

Debenhams (LSE:DEB)

Historically, Debenhams' share price has tended move with speed similar to a dog bunged up with grass trying to have a bowel movement. Not pretty to watch and eventually attention drifts to something less painfully slow - like a glacier (as an owner of two dogs who eat long grass... the simile was easy!).

Seriously, since 2013 we've been proposing a drop target of 32p. At the time, the share was trading at around 84p and now it's finally exploring the dizzy lows of 43p or so.

In normal share terms, we'd tend to expect the price to drop toward our 32p anytime now, ideally not actually hitting target but bouncing before it.

Alas, Debenhams doesn't do 'normal' and the final 11p plunge could take another year or so. Or it could happen tomorrow, just to spite us.

The reason we're making such a noise about 32p is due to Laura Ashley. That particular share eventually reached our 9p and bounced to 12p. While perhaps not the most spectacular movement - it failed to achieve escape velocity - only a plonker would ignore the 33% bounce.

Therefore, if our bottom logic is correct about DEB, should the share achieve 32p (or ideally just above), taking a long position with a tight stop to plunder a rise to around 50p isn't a silly concept.

The problem with Debenhams is below 32p. The share price ideally should not close below such a point as all our future drop targets become prefaced with minus signs. Usually, though, these 'ultimate bottoms' prove capable of something.

It's reasonable to ask where the heck we get our 50p target as it represents a 58% bounce?

Simple - we drew a blue line and speculated Debenhams may mimic Ashley in producing a useless - but useful - bounce. If the share does plan a final creep to our bottom level, anything now below 40.5p will tend to indicate the price taking firm grip of its zimmer frame at the top of a shallow exit ramp...

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, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. 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.