Zak Mir Charts the Fund Managers. CF Woodford Equity Income: AstraZeneca, GlaxoSmithkline, BAE Systems and Rolls Royce

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A saying which I have invented and am hoping will go viral on the financial markets is “If you can’t beat them, copy them” – a variant on “imitation is the sincerest form of flattery.” This is I suppose the basis of my series on the holdings of fund managers from a charting perspective.

The idea here is of course to be following in the footsteps of giants, and taking the view that however good they are from a fundamental perspective, their timing could be improved with a dose of technical analysis. That said, it would be difficult for anyone to beat the man currently regarded by many as the top fund manager in the UK, Neil Woodford.

What is interesting at his CF Woodford Equity Income fund is that at first glance the selection of stocks appears somewhat dull. In fact, it is probably the case that many might even class the mix of equities here as actually being somewhat boring. But of course boring is the magic word in fund management. The more conservative the manager and his style, the better he is perceived and in many cases the more funds under management.

Moving along to the top holdings in the Woodford fund and I have decided to go for two big pharmas and the two big aerospace & defence stocks.

AstraZeneca (AZN)

In the case of AstraZeneca (AZN) we will all be aware that the company has so far managed to see off tax inversion specialist Pfizer (PFE), although we perhaps wonder for how long. In terms of what we see on the daily chart the picture is that of a rising trend channel from April. The best call here is that the floor of the April channel is running through the 4,500p level, rendering most of August’s price action a bear trap. On this basis one would be looking for a top of April price channel target as high as 5,500p on a 1-2 month timeframe.

GlaxoSmithKline (GSK)

Not so chirpy is the present fundamental situation at GlaxoSmithkline (GSK) where the company has run into trouble in China in terms of being fined $490 million for “bribery” – otherwise known as ”for not being Chinese.”

From a technical perspective what can be said now is that we are looking at what could be the end of the recent breakdown for the shares. This started in March at 1,700p plus and ended with August’s dive below 1,400p. The position now is that the stock is backed by a rebound off the floor of the 2014 descending price channel at 1,400p. While above this level on an end of day close basis a return to the 200 day moving average zone at 1,571p could be on the cards over the next 4-6 weeks.

BAE Systems (BA.)

For BAE Systems (BA.) there has already been a 20% recovery from the April floor, but it would appear that there could still be further for the stock to squeeze on the upside. This idea stems from the way that there could be there could be momentum provided by the September bull flag breakout after a gap to the upside at the turn of the month. The expectation is that while there is no end of day close back below the floor of the February price channel / 20 day moving average, the upside here could be as great as the 2014 resistance line projection to 530p.

Rolls Royce (RR.)

Finally, we have Rolls Royce (RR.) where quite unbelievably even after the £1 billion share buyback announcement in June, there is a rather sickly feel to the price action. While we may be on guard for a snap back to the upside after the way over the past six months support largely above the 1,000p level, only a weekly close back above the March resistance line at 1,050p is likely to be a strong enough technical signal to convince most would be longs to press the buy button. The worst scenario on offer is that under 1,000p we head to the 2014 support line as low as 955p over the next 4- 6 weeks.


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