Chart of the Day: Imagination Technologies

For much of the 16 plus years that chip designer ARM Holdings was on the London market, the gripe was that it was trading at 50 times earnings and far too expensive from a fundamental perspective. Of course, in the wake of today’s takeover news it is on an 80 times valuation, and leaves its smaller cousin in the limelight too….

Imagination Technologies (IMG): 250p Technical Target 

Imagination Technologies has for many years been the poorer cousin of FTSE 100 chip designer ARM Holdings, with the irony being that even as the zeitgeist was arrived at for both companies in the wake of the smartphone revolution at the end of the last decade, it could be seen how Imagination seemed to struggle even more. The present position though shows how, in a way, “every dog can have its day” and that with the move by Softbank on one of the UK’s leading tech companies, it could very well be that this allows a positive re-rating, or at least sentiment improvement, over the near term. In fact, the technical picture here has been improving over the recent past within a rising trend channel from as long ago as December. The top of the channel is currently pointing as high as 250p, with only a weekly close back below the green 10 day moving average at 189p really delaying the upside scenario. In the meantime, fussy traders trying to improve the risk/reward would wait on any dips back towards the 200p zone to cool off the RSI back towards the neutral 50 zone.