Zak Mir’s Mid-week missive

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Not  being in touch with youth fashion, or perhaps even any fashion other than that of Carnaby Street 1972 (!), I cannot add too much regarding the fundamentals of French Connection (FCCN). As can be seen on the daily chart of the fashion retailer, there has been an extended base formation in the making on the daily chart since largely the middle of 2012. The problem here is how to anticipate correctly any break to the upside and which will signal the end of this basing formation and a new uptrend. It seems best to wait on an end of day close back above yesterday’s intraday high of 25p, a scenario that would target the top of the July rising trend channel at 28p. Perhaps as soon as the end of this year.

Onto the insurers. To my mind at least, insurer Aviva (AV.) is one of the main proxies / barometers of the current trials and tribulations within the Eurozone. This is of course due to its exposure to the crisis on the Continent.  On this basis one can say that the latest break towards £3.40 is a positive development both for the stock and the prospect of the sovereign debt situation being sorted out on a sustainable basis. But, even putting aside the link between Aviva and the perceived exposure to Europe, from a technical perspective we can see that since the end of September there have been several support points at and just above the 200 day moving average currently at £3.18. The fact that the latest bounce for Aviva has come off the top of a falling 200 day line makes the rebound that much more bullish and I would expect to see an acceleration towards the late June rising trend channel at £3.80 plus over the next 2 to 3 weeks. At this stage, only an end of day close back below the blue 50 day moving average at £3.30 would negate the positive scenario I put forward here.

Fidessa (FDSA)  shares do not normally hit the radar as far as interesting near-term setups, but the latest break back above the former £13 October support and then above the former August £13.47 support this week effectively delivers a double bear trap rebound. The implication is that while there is no end of day close back below £13.47 we would expect to see at least a retest of the 200 day moving average at £14.97. The timeframe is the next 2 to 4 weeks.

Finally, for those who have not had enough of Lonmin (LMI) shares in the recent past, we appear to have a new setup here in the wake of the failed Spike through 300p. The view is that former September intraday support at £2.79 combined with the blue 50 day moving average at £2.80 is now creating new support on a rights adjusted basis. We are looking for a retest of yesterday’s £3.18 high in the coming weeks, with the stop loss on the idea being an end of day close back below £2.79. I have to admit that on a fundamental perspective, it is difficult to be too optimistic about this company given the state of the mining industry in South Africa, but at least it can be said that on a technical basis we have a clear line in the sand which is the former September support.

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