Barclays shares and the Sheiks of Abu Dhabi

You could be forgiven for thinking that the sale, this week, of over 1.3billion Barclays shares heralds the demise of the current rally. And you might be right. Then again, it may make no more difference than just a blip in the general run up.

How to tell whether to sell or buy? Well let’s look at the action as shown by the chart (the chart always gives the full picture and indicates what is going on).

Here is a 5 year chart of the Barclays share price ; the bottom chart shows the volume; the small middle chart shows the relative strength of the share price movements to the FTSE 100 index – which, in this case, shows the share moving better than the index average.

Click on chart to enlarge

The 3 spikes in the volume tell the story when related to the price bar of the same week. The first, w/e 19 Sept 2008,  was obviously mainly selling volume (as the price fell hard the following week).

The second volume spike, w/e 23 Jan 2009,  coincided with (created!) the final low and was, very obviously, buying volume. This is where we can confidently assume that our Abu Dhabi friends did their buying. The volume then dropped off (little selling) and then, as a result, the price started to rise.

Then we can see the latest volume increase (the last bar) which corresponds with the Sheik’s selling of over 1.3 bn shares and, of course, the price correspondingly falls. But not far and not dramatically as might have been expected. Although much will now depend on what happens over the next week or two. Further selling will take the price lower but, if there is no heavy selling, then the current inherent strength of the share price should see it start to rise again.

So, to buy or sell Barclays’ shares? How do you make your decision?

Well, we suggest you refer to our chart (above) as we have marked the two current levels of support and resistance. As a holder of Barclays’ shares you might consider to sell or reduce your position if the price falls below the support level at 240p. as, if this level is broken, the price could go a lot lower.

If you are looking to buy Barclays’ shares then you might want to wait until the price has broken above the resistance at the 320p level. This would indicate continuing strength in the price run up and a lack of (any more) selling.