Chart of the Day: British American Tobacco

The success of Fever Tree Drinks (LON:FEVR) over the past year reminds us, if it were necessary, that so called “sin stocks” of all shapes and sizes can be a great asset class to invest in. On this basis British American Tobacco has to be regarded as a core holding.

British American Tobacco (LON:BATS): 5,500p Zone Technical Target

It is interesting that most of the FTSE 100 multinationals are currently sporting a similar setup in terms of their chart pattern on the daily chart. The collapse of Sterling gave a welcome boost to Dollar earners, with the added bonus being the initial aversion, after the Brexit vote, to UK-focused companies. While the latter phenomenon may have been corrected, the charting position of BAT looks to be extremely robust. This is said on the basis that we can draw a rising trend channel in place since as long ago as the beginning of the year, when the shares made their final bear trap below the 3,600p level and below the 200 day moving average, now at 4,097p. The chances are now that at least while the share remains above the floor of the 2016 price channel / 50 day moving average at 4,620p, we shall be treated to a new leg to the upside. The favoured destination at this point is the January resistance line projection currently pointing as high as 5,500p. The timeframe on this technical target could be as soon as the next 4-6 weeks. Only cautious traders would wait on a clearance of the last July resistance at 4,964p before taking the plunge on the upside.