Zak Mir takes a charting look at some of the most closely followed small caps on the London Stock Exchange. Today’s charts are for the FTSE 100, DAX, Dow, Bitcoin, Ethereum, Gold, Crude Oil, Active Energy, CleanTech, Eagle Eye, ITM, Iofina, Panther Metals, Pulsar, Raspberry Pi, Smarter Web, Xeros.
It is one of those markets where a few charts are stabilising, a few are looking tired, and a handful are setting up rather nicely if key levels hold. The broad picture at the end of the week is mixed.
As always, do your own research and treat these as chart-based observations rather than hard recommendations
FTSE 100: sitting on channel support
The FTSE 100 has broadly done what was expected, namely come down to the floor of its channel around 10,380. The market dipped slightly lower to around 10,365, but for now that channel base is still the line to watch.
If the index is going to shake off the current negative tone, it really needs an end-of-day close back above the 50-day moving average at 10,430. That would improve the near-term picture and suggest the latest weakness has been more of a wobble than the start of something nastier.
If, however, the FTSE closes back below roughly 10,360, then the next support area comes into view near 10,280, which lines up with the early April floor. If that gives way, the more bearish scenario opens up a move towards 10,080, the initial support area from March.
The upside case remains a return to around 10,650, particularly if there is some positive catalyst over the weekend. For now, though, the RSI at 47 remains below the neutral 50 mark, and that still hints that the market may have a little more downside pressure to work through first.
DAX: looking for support around the 50-day average
The DAX is edging back towards its 50-day moving average at 23,600, and the general hope is that support starts to come in around 23,800. If that area does not hold, the next obvious level lower is around 23,700, which is the floor of an earlier gap from this month.
On the upside, the natural target remains a retest of recent resistance and the top of the second gap, around 24,600. The issue with the DAX at the moment is not that the chart is unreadable, but that price action has become jumpy and spiky, making it harder to trust short-term moves.
That makes the support zones even more important. If the market can hold them, there is still room for a proper rebound. If not, it is likely to remain a stop-start affair.
Dow: holding up better than Europe
Of the main indices covered here, the Dow is arguably in the best shape. It has bounced around the gap support zone at roughly 48,800, and as long as that area remains protected, the chart still points to a possible breakout through 50,000.
If that breakout happens, the upside projection reaches towards the November resistance line, potentially as high as 52,000 by the end of next month.
On the downside, the key line in the sand is the 50-day moving average at 47,900. If there is any sort of rug pull in the market, that is about as low as the current setup would ideally want to see the Dow go.
So compared with the FTSE and the DAX, the Dow still looks like the cleaner chart.
Bitcoin: recovery under pressure at channel resistance
Bitcoin had been looking as though it might be able to extend towards the 200-day moving average, but that move is starting to look less convincing. Instead, there is a risk that it repeats the sort of price action seen in January, where it fails at the top of the recovery channel and rolls over.
This time the barrier is the top of a three-month recovery channel, and if Bitcoin does fail there, the obvious fallback target is the 50-day moving average at 71,000.
That downside is not confirmed yet, but there are warning signs:
- Bearish divergence in the RSI
- Failure so far to break decisively higher
- A need for a quick push through 80,000 to revive momentum
Unless Bitcoin can get through 80,000 in short order, there is a growing chance that this recovery phase may already have offered the best it has got.
Ethereum: near the top of the range, but not out yet
Ethereum is in a similar position. Price has pushed up to the top of the falling trend channel that has been in place since August, and also got close to the top of the rising trend channel from February around 2,460.
At the moment it looks as though Ethereum is threatening to fail there, although it has not quite done so decisively yet. The immediate support area sits around 2,260, and a move below that would bring the 50-day moving average at 2,166 into focus.
The bullish alternative is straightforward enough. If Ethereum can break through 2,460, then the upside target becomes 2,801 and the 200-day moving average. That would be significant, not least because Ethereum has not traded above that 200-day line since early November.
So this is another chart at a fork in the road. Hold the recent gains and push through resistance, and the setup improves sharply. Lose support, and the market is back into retracement mode.
Gold: support holding, but momentum fading
Gold has stalled below the top of its falling trend channel and also remains under the falling 50-day moving average at 4,871. Recent support comes in around 4,600, and while that level continues to hold, there is still at least a case for another attempt at the 50-day line.
That said, the chart is getting harder to like on a day-by-day basis. The main reason is the weak momentum profile. The RSI has faded to 44 after repeatedly failing around the 50 zone during the week, and that usually points to a market that is struggling rather than building strength.
For now, gold looks as though it will do well simply to continue defending 4,600. Unless momentum improves, that support level may end up being the main story.
WTI crude oil: from mess to recovery candidate
Crude oil has been messy, but from a charting perspective things have improved. There has been a bear-trap rebound from below the 50-day moving average, followed by a break of a resistance line from earlier this month.
That leaves the market looking stronger again, especially with the RSI back above the neutral 50 level.
The key range now appears to be:
- Support and trigger area around $92
- Upside potential towards $105
In other words, the recent dip below the 50-day line now looks more like a shakeout than a breakdown. As long as crude remains above 92, the path of least resistance looks higher.
Small-cap stock charts
- Active Energy continues to improve and has already spiked through the 0.15p gap target that was in focus. The important thing now is an end-of-day close back above 0.15p. If that happens, the next target is old resistance from August last year, up towards 0.24p by next month. The tone here is constructive. Momentum is building, and the chart looks stronger by the day.
- CleanTech appears finally to be finding support after a pullback. The shares are sitting around the December uptrend line and are trying to break back above the 200-day moving average near 7p. If the stock can close above that 200-day line, the next upside level could be the 50-day moving average through 9p by the end of next month. The encouraging feature here is the bear-trap rebound from below initial April support at around 6.7p. While price remains above that, the chart still looks like a recovery setup rather than a failed rally.
- Eagle Eye has a rising trend channel that has been in place since last July. The top of that channel points to 440p by the end of next month. To unlock that move, the shares really need a decent weekly close above February resistance around 380p. A clean break through 380p would keep the bull case alive and put 440p firmly on the radar.
- ITM is an interesting one, particularly with the broader backdrop of NATO and government support in the sector. On the chart, the key feature is a flag pattern that looks like a mid-move consolidation. If the shares can manage a weekly close above recent resistance at around 145p, the resistance line projection from June last year suggests scope towards 200p by the end of next month. Technically, this looks like the sort of breakout setup that can gather pace if the trigger level gives way.
- Iofina is not one that gets covered often, but the chart has quietly been improving. A break of recent resistance at 32p now leaves the shares looking towards 40p next month, or possibly even sooner. The impression here is simple: something appears to be happening, and the breakout has improved the technical picture.
- Panther Metals is consolidating well above a rising 200-day moving average, and the 50-day line is rising too. That combination usually gives a chart a much sturdier look. If the shares can remain above those moving averages and continue to hold above the resistance line around 87p, then the top of the longer-term channel from last year points towards 130p over the next four to six weeks. That timeframe may be a little ambitious, but the structure is there for a meaningful follow-through if the current breakout develops properly.
- Pulsar has had financing chatter around it, but the chart itself has shown resilience. The shares bounced from the floor of a rising trend channel that has been in place since last September. An end-of-day close back above the 50-day moving average at 94p would reopen the move towards 110p by the end of next month, perhaps sooner. The main condition for that bullish case is that the stock stays on the right side of 80p, which has acted as support since March.
- Raspberry Pi is still looking interesting and has already managed to hit the second upside target. The latest setup now points to a retest of the recent April peak at 681p. As long as the shares remain above the 600p level, that retest looks achievable following the latest bounce. This is one of those charts where support and momentum have lined up reasonably well after the pullback.
- With Smarter Web, the Bitcoin price remains very important, especially given the company’s Bitcoin angle. The chart itself is showing a sideways shuffle above a rising 50-day moving average, which is not a bad pattern at all in a firm market. The RSI has also bounced well above 50, reinforcing the idea that momentum remains supportive. While the shares hold above 35p, the target is the top of the triangle formation from February, up towards 47p by the end of next month. So long as Bitcoin does not spoil the party, this remains a constructive setup.
- Xeros appears to have broken a resistance line from back in November. Depending on how that line is drawn, the breakout may be slightly early to call, but the overall look is still encouraging. The current chart points towards the top of the channel, orthe top of the broader range, near 2.4p by the end of next month. Ideally, the shares now stay above the 50-day moving average at 1.3p. If they do, the breakout case remains intact.
The big picture
The market tone going into the weekend is neither outright bullish nor outright bearish. It is more selective than that.
The stronger charts include the Dow, crude oil, and several of the smaller-cap stock names that are either breaking out or trying to do so.
The more vulnerable charts include Bitcoin, Ethereum, gold, and to some extent the FTSE, where momentum is fading and support levels are doing a lot of the heavy lifting.
That leaves a fairly clear game plan for the next phase:
- Watch whether the FTSE can reclaim 10,430
- See if the DAX can stabilise around 23,600 to 23,800
- Keep an eye on whether the Dow can push through 50,000
- For crypto, monitor whether Bitcoin can break 80,000 and whether Ethereum can clear 2,460
- In commodities, gold needs to defend 4,600 while crude looks stronger above $92
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.
