I have always rather fancied myself as being part of the great entertainment industry even though the industry may not feel the same way! Ideally, for someone of my age, being one of the Rat Pack was an attractive concept (more Dean Martin than Sam Davis Jr. mind!). Alternatively, in the world of cinema, then perhaps the new the Omar Sharif or in film comedy maybe Peter Sellers?! In music, a member of the Rolling Stones around the time of Exile on Main Street would also not have gone amiss. But, come to think of it, life as a chartist may be the correct role in life after all, especially as you do not have the problem of being mobbed in the street (unless you’re Nassim Taleb!). As in Hollywood where you are only as good as your last film, in the City you are only as good as your next recommendation.
First Group
And so onto my next recommendation! I have to admit that as far as the recent price action of First Group (FGP) is concerned, I have been focused upon the massive gap to the downside, apparently caused by the transport group’s rather nasty run in with a certain Richard Branson. The first part of the dithering in the stock came from October’s 183p intraday low – a penny below the July 184p low but which turned out to be a bear trap nonetheless. The usual rule is that as soon as you see such a narrow trap versus a former low you go in on the long side. Unfortunately, on this occasion it could be said that rabbits caught in headlights might have been a more apt description for my prevarication on the stock as on Wednesday the stock could have been picked up for 190p.
While the opportunity to go long in the low 190p’s may be gone, Thursday’s end of day close back above the former 191p intraday low of last month leads me to believe that we are looking at a potential major turnaround in First Group. In terms of the upside, it would be wonderful to think that the shares could close the gap up to 230p but in the first instance we are shooting for the area focused on the 50 day moving average at £2.22mover the next couple of weeks – providing there are no fundamental bolts from the blue – something which First Group has proved itself to be something of a past master at…
Vodafone
Every week always has its stock casualties and this week the market has been dominated by the meltdown action in both BG Group (BG.) and Centamin Egypt (CEY). In fact, both stocks are currently in such a pickle it seems wise to avoid making any technical commentary at all. The other leading situation at the moment which is proving a headache to read is the price action of Vodafone (VOD), with the big question being whether this may be a time to go long just under £1.70. In the alternate (I sound like a politician now don’t I?) whether the falling near-term moving averages and the rather ragged head and shoulders type chart pattern of recent months is as bad as it looks?
From my perspective, I think that it may be worth giving the stock one last chance to redeem itself and so go long. This is said on the basis that even though the share price has fallen materially towards the end of October, the RSI trace has not probed lower than 30 on this occasion. Therefore, it may be worth giving the stock the benefit of the doubt while there is no end of day close back below the latest £1.67 intraday low. That said, any sustained weakness below this level in coming days does signal something rather sinister is going on and so cancelling the bull argument.