The latest setback for the FTSE 100, coming days after the record high, leaves most of us disappointed but hardly surprised. While there may not be any reason to short the market in a wholesale fashion, the best that one might suggest is that selective buying remains the approach of choice.
But what can be interesting in the wake of one day declines for the London market of 2% or 3% is picking out those plays which have withstood the bears, or even managed to go against the sinking feeling. While some of these stocks may just be one off short squeezes, with the appropriate charting techniques one can usually sort out the wheat from the chaff.
This is especially as we know that the usual problem during stock market setbacks is that we see the babies thrown out with the bathwater as whole sectors of stocks are marked down together, even if the precise fundamental positions of the companies are not alike.
Starting with Inchcape (INCH), and it can be seen how the starting gun on the latest bull run was an unfilled gap to the upside through the 200 day moving average, then around the 638p level. What was a standout in the wake of that 200 day line clearance is the way that the shares did not need to retest this feature, and have instead found support at, or just below the 50 day moving average – now at 720p.
This should allow us to conclude that especially while the 50 day line is held on an end of day close basis we should be treated to a top of August price channel top target as high as 850p over the next 2-3 weeks. A tighter stop loss for those who wish to trade Inchcape shares with tighter money management than the 50 day line would be to use the initial 756p March resistance.
Next up in terms of the stocks defying gravity at the moment is James Fisher (FSJ), where we are trading in the aftermath of a triple bottom between October and January, as well as the clearance of the 200 day moving average at the beginning of this month at 1,241p. What has been particularly encouraging to date this month is the way that the retracement from the 200 day line break failed to reach back down to this feature before a new rally took hold.
This allows us to speculate that at least while above the initial March resistance at 1,319p on an end of day close basis the upside here could still be significant, despite the gains already notched up. The favoured upside at this point is seen as being as great as the top of a rising trend channel from September, currently heading as high as 1,600p. The time frame on such a move could be by the end of next month.
The final stock of this selection could perhaps be described as the “joker in the pack.” This is because merely the name of the company, Raven Russia (RUS), may put off the risk averse. However, it can be seen that over the past few sessions there has been a consolidation above the 50 day moving average at 42p. There have also been two hammer candles, the first at the beginning of the month off the December price channel floor, and the second for Tuesday’s session. The suggestion now is that provided there is no end of day close back below the 50 day line, the upside here could be towards the four months price channel top at 55p over the next 4-6 weeks.