Zak Mir takes a charting look at some of the most closely followed small caps on the London Stock Exchange. Today’s charts are the FTSE 100, DAX, Dow, Bitcoin, Ethereum, Gold, WTI Crude Oil, Ajax, Critical Metals, Ferro Alloy, Hydrogen Utopia, Raspberry Pi, and Reveille.
Several major indices are testing the floors of rising channels, while Bitcoin and a handful of smaller stocks are showing more promising setups. The question across these charts is much the same: can support hold long enough for a move back towards resistance?
As always, do your own research and treat these as chart-based observations rather than hard recommendations
Major indices: Support is doing the heavy lifting
FTSE 100: A potential base ahead of the Budget
The FTSE 100 is still hovering around the floor of its rising trend channel. Today’s low near 10,660 brought it within a few points of that support line. Above the market, the rising 50-day moving average sits near 10,770, with resistance from late July around 10,800. That leaves a range of roughly 150 points while we wait for a break.
The relative strength index, or RSI, is below its neutral 50 level, so momentum is not yet convincing. On the other hand, both the 50-day and 200-day moving averages are rising, and the channel floor has been tested repeatedly. It could be a base in the making. We saw a similar series of tests around the 50-day line in July before the index reached new highs, although I would be more cautious about expecting another high ahead of the Budget.
DAX: A bounce is possible, but momentum raises a warning
The DAX is also bumping along the bottom of a rising channel, around 25,300. The precise angle of that channel is open to interpretation, but the immediate picture is clear enough: the index is trading between potential support there and its rising 50-day moving average towards 25,800.
If it rebounds, 26,200 looks like the first logical resistance level. I would not assume much more than that for now. The RSI has shown a failure pattern during September, which keeps open the possibility of a test of July’s gap near 25,100, even if that proves to be only an intraday dip.
Dow: Looking for the channel floor to hold
The Dow is trying to find its feet around the floor of its rising channel near 51,400. If that area holds, the next level to look for is the 50-day moving average at roughly 52,800, potentially over the next week or two. A resistance line dating from early last month lies higher, around 53,200.
For now, the priority is simpler than a push through resistance: support established since June needs to hold just below current levels.
Cryptocurrency: The stronger-looking charts
Bitcoin: Holding above the old range matters
Rather unexpectedly, the cryptocurrencies look like the best of the bunch. Bitcoin has consolidated above its recent range, with the important boundary around 82,000. As long as it stays above that level, I am still looking towards 94,000 by the end of October. That target had looked possible by the end of September, but the move has stalled a little.
A fall back into the old range would change the picture and could bring the 50-day moving average around 74,000 into play. Ideally, Bitcoin remains on the right side of 80,000 rather than testing that deeper support.
Ethereum: Broken resistance could become support
Ethereum is also trying to push higher. The first target line is around 2,900, with former resistance from January around 3,400 as the more ambitious target by the end of October.
The key level underneath is 2,580, an area of recently broken resistance. An extended range often needs a retest before a move can continue, so a return towards that level would not necessarily spoil the setup. I am not expecting a sustained move much lower, although a brief nudge beneath it is possible.
Gold and crude oil: Two very different tests
Gold: Rising averages meet weak price action
Gold remains disappointing. Last week’s interest-rate developments knocked an emerging rally off course, and the RSI is now well below 50. There also appears to be a wall of resistance around 4,400.
The metal may still be just inside its rising channel from June, but it is trading either side of the 50-day moving average near 4,312. That makes the channel floor a close call. Both the 50-day and 200-day averages are rising, yet recent price action argues for caution. A test of former June and July resistance around 4,200 is becoming easier to imagine, even if gold subsequently turns higher.
WTI crude oil: A bounce from the 50-day line
Crude oil remains a critical chart. It has bounced above a rising 50-day moving average, with former resistance around $87 adding another potential layer of support. For oil bulls, that combination is encouraging: a bounce from a rising 50-day line can signal that the broader advance remains intact.
The next upside objective would be a move towards the lower edge of the overhead gap around $97, perhaps filling more of it before the market runs into trouble again.
Smaller-Cap Shares to Watch
- Ajax: Watching the rising 50-day average: Ajax has been trading in a ragged range between its 50-day moving average around 5.5p and a recent spike above 7p. What keeps the chart interesting is that support has held above the rising 50-day line, even during an intraday dip. That sort of behaviour can precede a significant move higher. While the shares remain above roughly 5.5p, dips towards the average look interesting, with a break towards February’s resistance line around 10p the target by the end of October.
- Critical Metals: Targets cleared, with a golden cross approaching: Critical Metals has already passed its first target at 15p and its second at 24p. Clearing 24p opens the possibility of an acceleration, although 40p by the end of October is a punchy objective. The 50-day moving average is approaching a cross above the 200-day average, a configuration known as a golden cross. The approach to that crossover can be a particularly strong phase for a chart. As long as the shares hold above recently broken resistance around 22p, the route towards 40p remains open.
- Ferro Alloy: An island reversal changes the picture: The move in Ferro Alloy has been striking. The shares reached the first target at 4.5p, leaving the 200-day moving average near 5.66p as the next logical objective over the coming days. Beyond that, former April resistance around 6.3p is a possibility by the end of October, or sooner. The notable feature is a bear-trap island reversal: the price made new lows and then gapped higher. An upward trend line in the RSI had offered an earlier clue that accumulation might be taking place. What had looked like an overexcited setup now has a much stronger chart configuration behind it.
- Hydrogen Utopia: A breakout would provide confirmation: Hydrogen Utopia has looked unusually subdued given its recent news flow, including the possibility of a grant. Support has appeared around, or just below, 2p. The hurdle is the combination of a resistance line dating from December and the 200-day moving average around 2.66p. A break through both would point towards the top of the recent range, potentially by the end of October. Anyone wanting confirmation rather than anticipating the move can wait for that combined barrier to give way.
- Raspberry Pi: Today’s gap sets up a channel target: Raspberry Pi has gapped through its 50-day moving average following today’s update. That puts the top of its channel, around 925p, in view by the end of October. The broader setup holds while the shares remain above the 50-day average in the 630p area. Ideally, they would also stay above today’s initial low around 690p.
- Reveille: An early base on Aquis: Reveille, which trades on Aquis, looks as though it may finally have built a base. The shares are pushing through the 50-day moving average around 6.2p for essentially the first time since coming to market, which makes this a meaningful test. The 200-day moving average, currently near 11p, is the upside target by the end of October. That is another ambitious call, but the RSI is showing some bullish divergence and the chart suggests that the earlier slack may have been taken up. There is not a great deal of trading history to work with, so this remains one to judge by whether the breakout holds.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
