Technical Analysis of UK Bank Shares – Barclays, LLoyds, RBS, HSBC, Standard

Barclays:

General situation:

In an Uptrend which, if it continues, should provide higher prices….The steep downtrend from the 800p level down to the 50p area ended, as can be seen from the charts below, with a double bottom formation in Jan. and Mar. ’09. Note the spikey high volumes – indicating the heavy change over of shareholders. This also signalled the end of the downtrend.

Then, after a 5 month (Jan to May ‘09) Accumulation (or Basing) trend the Uptrend started. This was confirmed by the crossover (arrowed) of the  of the 34 week and 13 week exponential moving averages on the weekly chart and their equivalents on the daily chart.

This Uptrend is still in play although, since August, it has been muted. The reason is the resistance at the 397p level area which was created by the lows in Jan. and Mar.’08 and the highs in Aug. and Sept. ’08 (“old lows create new highs”).

The movement of the share price measured against the movement in the FTSE 100 index is recorded as its ‘Relative Strength’ (shown as the coloured dotted ‘Rel.Str.’ line on the charts) and this shows that the share price of Barclays is progressing significantly below the average of the FTSE 100 shares.

On the weekly chart there are two resistance levels shown – the 397p level (mentioned above) and the 422p level. This higher level is the halfway point (the 50% retracement) of the long Feb ’07 to Jan ’09 downtrend and it represents a level of potential resistance to higher prices. Additionally, whilst the price remains below this ‘50%’ level it is considered as being potentially weak and more susceptible to sudden down moves.

Click on chart to enlarge it -

If you are looking to sell: The stock is in Uptrend and so could be held in expectation of that trend continuing and providing further increases in the price (“ the trend is your friend”). However, if the price should fall back and go below the 310p level then the trend will have likely changed and in which case the price could then fall a lot lower.

So, we suggest an exit stop of 310p or thereabouts or, if you originally bought your shares at a much higher price and have been holding on to try to recover a larger proportion of your loss and you do not want to lose any more then you might consider an exit stop of, say, the 345p level.

It is worth considering that, as the share price is performing below the average (of the FTSE 100 stocks as a whole) there are much better opportunities with some of those other stocks to effect the recovery of your capital (“the lost opportunity cost”).

If you are thinking of buying: Well, yes – the stock is in Uptrend after all and so higher prices are likely but we would suggest that you wait until the price has risen above the 397p level and then fallen back and made a new (and higher) low on or above 397p. Preferably that the price has closed above 422p as well.

It is acknowledged that you will ‘lose’ some of the growth from its present level but, frankly, there is more danger that it may not succeed in getting above 422p and you will then probably nurse a loss. And, if the price does rise above 422p then it is likely to move very quickly up to the 580p level before meeting any further resistance – and that would produce a tidy profit.

ShareHunter.com 21 Oct.

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