I have to admit that the insurance sector is not one that fascinates me in any way, in fact the whole area appears deadly dull! Indeed, the only real source of interest that I can muster is the way that behind all the mathematical mumbo-jumbo of premiums / actuaries (yes those highly paid dullards!) etc. we are looking at a sector which I am sure is ultimately something of a rip off for the end user! But of course, given the way that the Great British consumer has shown him / herself to be quite happy in being ripped off by banks, supermarkets and utilities, a little stealth robbery when it comes to home or health insurance probably does not do anyone too much harm eh? In fact, just blame it all on the EU…
Let’s kick off with the charting picture at Aviva (AV.) and it can be seen that we are looking at a position now where the trend is being maintained to the upside via a rising channel from June and with its support line projection running at £4.20. If you add in the way that the bull run was backed by a 50 day/200 day moving average golden cross buy signal in July, it is difficult not to be sucked into the idea that further upside will be seen here sooner rather than later.
In fact, to me, whilst the 2013 uptrend line is held at £4.20 on an end of day close basis, we should be treated to a 1 to 2 month price target as high as £4.80 sight of the June resistance line projection. Only cautious traders would wait on a weekly close back above the 50 day moving average at £4.30 before taking the plunge on the long side.
It is helpful that as far as the Legal and General Group (LGEN) daily chart is concerned that we are looking at a position which is remarkably similar to that seen with Aviva described above. Here there is also a rising trend channel from June, with most of the price action being seen in terms of the support points coming in at, or just below, the 50 day moving average level at 208p currently.
The view at this point is that we would expect to see further upside, certainly at least while there is no end of day close back below the June uptrend line at 202p but that a buy trigger is probably required before Bulls go all in again. The ideal scenario for this buy signal would be an end of day close back above the 50 day moving average, ideally combining with a break back above neutral 50 for the RSI oscillator currently at 41. But whatever trigger is used to go long in the near-term, the perceived upside here is as high as the 2013 price channel top at £2.30, a level which makes for a decent 4 to 6 week price target to me.
If nothing else, it can be seen that on the daily chart of RSA Insurance Group (RSA), that there is a stark contrast in the charting configuration when compared to the two companies described above. November witnessed two massive unfilled gaps to the downside through the 200 day moving average currently at 117p, and the misery was compounded by the way that there was a dead cross sell signal between the 50 day and 200 day moving averages soon after the double gaps to the downside were delivered. Indeed, the aftermath of last month’s shenanigans is bearish enough to suggest that while there is no end of day close back above the November resistance line/10 day moving average at 102p we could still see further downside towards a July support line projection heading as low as 94p as soon as the end of December.