After yesterday’s sudden and steep fall, can Prudential be considered as a ‘buy’ this morning?
Our immediate answer has to be “No, please wait for a price rise which is accompanied by good volume or, at least, a high close tonight”.
Indeed, this morning’s price has shown further decline from yesterday’s close. So, where is this price retracement likely to bottom out and a (partial) recovery rally begin?
Well, it could be that this morning’s low of 486p could form the bottom. But it is too soon yet to bank on it.
Weekly chart -
Daily Chart –
The Prudential share price does follow the technical analysis ‘rules’. Note firstly how the 2009-2010 recovery rally from the March’09 low rose to, and turned over on resistance found at, the 75% Retracement of the big 2007-2009 ‘bear’ run; almost spot on the 661p level. So, now note that the price today is straddling – ‘testing for support’ – the 50% Retracement level of that same bear run at 506p.
Because yesterday’s fall was so fast we would expect the price to fall below the 506p level (it has!).
It is also significant that the approx. current price – 496p – is a 25% fall from the 661p high.
So, there is a lot of potential support for the Prudential share price at its current level. But, in our view, it would be too risky to jump in to a Long trade just yet. We would prefer to wait to see what today’s price action looks like (tomorrow). If today’s close is at the top end of the day’s spread then a (risky) Long punt may be on. If, however, the close today is at the low end of the day’s spread then all bets are off and it would be far safer to wait again.
The point being that the price may yet have further to fall as the 50% Retracement of the 2009-10 recovery rally lies at the 431p level and it is not impossible that the price may want to test for support at this level.
Hope that this helps and is of use to you.
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