Market Direction: Dow above 17,500 Targets 18,000 within Wedge
LSE (LSE): 20 Day Line Break Could Lead To 3,500p
We should be on the edge of our seats as we eagerly await the fate of the London Stock Exchange, given that after a back story of some 15 years, almost anything could happen. By anything we can say that there could be a German deal, an American counter deal, or actually no deal at all. The latter scenario would of course mean that our Cinderella exchange is not big enough to be a truly influential global player, but too big to be nimble in terms of innovation. Looking at the daily chart we can see how a rising trend channel can be drawn in from as long ago as the beginning of the year. There was also good news technically last month in the form of a 50 day/200 day moving average golden cross buy signal. The present position is that we see the shares resting around the 2,800p zone, which was former resistance in December and is now the floor of the 2016 trend channel. This should be enough for aggressive traders to buy the dip. But given the way we are in a complex fundamental situation at the moment, there may be those who wish to see a fresh technical momentum trigger. This would come in the form of an end of day close above the 20 day moving average at 2,834p. Above this feature delivers a best case scenario target as high as 3,500p, 1-2 months after the 20 day line is cleared. At this stage, only back below the 50 day moving average at 2,646p is seen as being outright bearish for this situation.
RBS (RBS): Wedge Reversal Buy Opportunity
Given the way that RBS has been remarkably consistent in terms of losing taxpayers’ cash over recent years, and we are currently in the midst of a tax avoidance witch hunt, it is surprising that someone, somewhere has not said, “Enough is enough!” In fact, I would like to start a campaign right now. Perhaps the idea of closing RBS and saving Tata’s steelmaking could be a winner for the social media/mob rule times we live in? Looking at the daily chart of Fred Goodwin’s former bank it can be seen how there has been a bullish falling wedge in place since as long ago as January, with decent, if not unspectacular buying interest coming in at the floor of the formation now at Friday’s 207p intraday floor. This zone is the area to buy down to, with an end of day close stop loss back below the 200p level. While the stock can consolidate above 200p one would be looking to a top of wedge formation target as high as 223p as a minimum. But the hope would be that there is enough pent up momentum to take the stock as high as the 50 day moving average at 233p over the next 4-6 weeks, even if the ongoing bear trend kicks in again after that.
Royal Mail Group (RMG): Bull Flag above 200 Day Line
We have had to be patient, and may continue to be so at Royal Mail, even though the technical position here looks to be a solid one. The main positive development here in the recent past came in last month with the gap up towards the 200 day moving average at 464p currently. The classic technical message now is that provided there is no end of day close back below the 200 day line one would be looking to a continuation of the journey higher within a rising trend channel which can be drawn in from as long ago as September. The expected target on a clearance of the initial April resistance is as high as the 2015 resistance line projection pointing at 530p, a 1-2 months target.
Small Caps Focus
EKF Diagnostics (EKF): Extended Base Points Back towards 17p
What can be seen on the daily chart of EKF Diagnostics is the way it has not exactly been a fast journey for the shares in recent months. But one of the better rules in charting is that the slower the turnaround, the more robust and extended it can be in magnitude. On this basis one would be relatively confident in suggesting that there will be further progress within a rising trend channel from November over the next 1-2 months. The assumed target here is the top of last year’s price channel as high as 17p, with this being valid while there is no end of day close back below the 50 day moving average at 10.47p.
Orsu Metals (OSU): Best Case Scenario Technical Target at 3.75p
Although it is clear that Orsu Metals has come up a long way in a short space of time, we do have a potentially interesting set up for those who are optimistic of yet further gains. This is because it is possible to draw a broadening triangle formation, which has been in place since as long ago as September. It has its resistance line projection heading to 3.37p, and a decent end of day close today above previous post October resistance at 2.05p could take the stock towards the indicated zone. Only back below last month’s 1.5p resistance is regarded as being outright negative at this stage.
Red Rock Resources (RRR): Above 200 Day Line Targets 1p
The recent history of Red Rock Resources has certainly been rather more positive than was evident before the start of this year. Therefore we seem justified in looking to further recovery. This is even though there has been an initial knock back from the 200 day moving average at 0.57p. The chances now are that as little as an end of day close back above the 200 day line could lead to the top of a broadening triangle which has its resistance line from late September heading to 1p. The timeframe on such a move is regarded as being one month from any 200 day line break.