Where next for NatWest and the banking sector?
NatWest's share price potentials mirror the sector, and our analyst suspects a rebound may be imminent.
10th August 2020 09:54
NatWest's share price potentials mirror the sector, and our analyst suspects a rebound may be imminent.
NatWest and the Banking Sector (LSE:NWG)
Our weekly dip into the murky waters of the banking sector takes a closer looks at the NMX8350 Sector Index.
Why? We're starting to suspect and hope the decline of the retail banks is fairly close to a bottom, and hopefully is the bottom.
Firstly, if we review the low the last time the banking sector collapsed in 2009, the index achieved 1,877 points.
This number is fairly interesting as the big picture points at 1,896 as a bottom on the cycle since the financial collapse.
Secondly, if we calculate on movements since the Covid-19 drop, the sector works out with 1,730 as a potential bottom.
Despite this being lower than the 2009 drop, it still hints at some optimism for a bounce anytime soon.
But of course, we obviously worry ‘lower low’ thinking shall prove an issue as this takes the sector into a zone where 901 calculates as the ultimate bottom for the market place.
This certainly ties in with some really foul calculations against some banking sector components but we'd hope the visuals alone will merit an upward bounce anytime soon.
Currently the sector is trading at around 2,010 points, needing below 1,940 to signal a coming reversal to 1,896 with secondary, if broken, at 1,730.
If our suspicion of a rebound being imminent proves valid, any recovery on the sector needs above 2,500 points to impress as this will imply a movement has legs.
Source: Trends and Targets Past performance is not a guide to future performance
NatWest’s share price potentials pretty neatly match the potential misery from the ruling sector above.
Now below 103p now suggests the potential of 93p provoking a bounce point.
If broken, our secondary bottom calculation works out at 79p.
The funny thing about the secondary number is this price level would certainly trip all sorts of stop loss levels, along with triggering sell orders for those assuming NatWest are about to fall off a cliff.
If our calculation demanding the share price actually bounces at 79p proves correct, quite a few traders will find themselves covered in egg!
Overall for NatWest, our ultimate bottom, the level below which we cannot calculate, remains at 50p.
For now, we suspect reversals must be pretty close to entering end game territory.
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.
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