Zak Mir takes a charting look at some of the most closely followed small caps on the London Stock Exchange. Today’s charts are FTSE 100, DAX, Dow, Bitcoin, Ethereum, Gold, Asiamet, Cloudbreak, First Class Metals, Great Western, Hydrogen Utopia, Light Science, Mkango, Prospex, Pantheon, Tooru.
I want to walk you through the picture I am watching across the FTSE 100, European and US indices, crypto, gold and then a run through a selection of small caps that have been active on the bulletin boards. I will call out key levels, momentum signals and what I am watching as potential support or trouble spots.
As always, do your own research and treat these as chart-based observations rather than hard recommendations.
Major indices
FTSE 100
The FTSE 100 is sitting near record highs under a Labor government, which is not something many were expecting. The channel top I am watching is around 9,680, a level I had pencilled in for the end of next month and which now looks reachable possibly sooner. The market needs to stay above the recent broken resistance at 9,480 for the bullish case to remain intact.
Technically we have had a series of RSI 50 rebounds, the last about a week ago, and price bounced off the floor of the rising channel and the 50-day moving average before heading higher. For now it looks smooth, but I remain alert for any change in momentum.
DAX
The DAX is resting near the 50-day moving average, which is around 24,000. Above that there is a solid platform for a move to the upside toward the channel top from April at about 26,000, which I am targeting by the end of next month.
There was a brief dip below the 50-day, but this index clearly prefers to be above that line and above RSI 50. A clean end of day close above recent resistance at about 24,400 would be a positive momentum confirmation.
Dow Jones
The Dow is consolidating at relatively constructive levels after breaking resistance around the low 46,000s. If it holds above around 46,200, I think the top of the channel and fresh record highs through about 48,200 are in play by the end of next month.
A sharp pullback or any market shock could drag the index toward the 45,900 area and the 50-day moving average, which acted as support earlier this month and in August. That is the level I would watch for risk management.
Cryptocurrencies
Bitcoin
Bitcoin is trading around its 200-day moving average, which I am watching at roughly 108,000. The 50-day moving average is nearer 114,000, and a clear breakthrough above that 50-day would give another run at the highs.
My upside work suggests a best-case near 135,000 by the end of next month, although that may now stretch to the end of the year given a slight slowdown. The immediate floor of the channel sits around 103,000. The RSI is still below neutral at about 44, so we must respect a possibility of range-stalling or a retest down toward the June support area near 98,000 in a worst-case scenario.
Ethereum
Ethereum has a reassuring uptrend line from April at roughly 3,740. The 50-day is closer to 4,249, which is the next resistance area. As with Bitcoin the RSI sits below neutral, so I am mindful of a potential test of the April trend line or the August lines near 3,550 and 3,360.
At present I am hoping the April uptrend line holds and provides a base for a move higher if momentum returns.
Gold
Gold produced a lot of volatility after a run to a record through about 4,370 and then a pullback. Critically we have managed to stay on the right side of the 4,000 area and I noted a recent close back above about 4,050. The next support zone around 4,060 has held and the RSI remains comfortably above neutral at about 50, so this looks like a healthy consolidation after a spike higher.
Selected small caps and bulletin board movers
Now for the microcaps and exploration/energy plays that have been showing action. I am focusing on chart structure, moving averages and RSI signals for these names.
- Asiamet
This stock had been stuck near the 1p level for a long time. We have seen a significant breakout, with a channel top near 1.4p that I would expect by the end of next month while the shares hold above about 1.1p on an end of day basis. The breakout candles look positive.
- Cloudbreak
Cloudbreak delivered a vertical move from the end of August and remains in a strong trend. I am targeting the top of the rising channel around 1.75p while the floor around 0.9p holds. RSI has stayed above neutral 50 since the end of August, which is a hallmark of a robust trend.
- First Class Metals
After a period of mudslinging and noise that has now quietened, the chart is looking constructive. The 50 and 200 day lines are rising and the immediate 50-day support sits near 2.17p. I see scope up to around 4p by the end of next month while we stay above that 50-day line. The stock has shown a couple of RSI 50 rebounds in the last month which supports the bullish view.
- Great Western
Great Western has managed to get back above the old gap top from June near 1.55p. What looks like a mid-move consolidation resembles a bull flag, with a target toward the top of the channel from June near 2.5p. The 50-day moving average sits around 1.75p. Fundraisers and corporate events could affect the path, but structurally this looks positive.
- Hydrogen Utopia
I tweeted about this one yesterday because a big breakout looked possible. The shares were pulled back from above 2p but crucially they are sitting at the 200-day moving average around 1.65p. If the stock can hold that level the initial target of about 2.25p still stands, and a best-case scenario toward 4.5p by the end of next month could still be delivered. The shares are trading above a rising 50-day line and have produced RSI 50 rebounds, so there is a positive build.
- Light Science
Light Science has been powering higher and has already blown through the earlier target near 4.65p. The next level I am watching is around 7.6p. The stock gapped higher and both 50 and 200 day lines are rising. Momentum looks to be building, so this looks like a proper rerate.
- Mkango
Mkango gapped on a reassuring RNS and hit an intraday best case around 97p, with highs today near 85p. The shares then pulled back, but as long as they remain above the mid 50p area they retain a path to the 80s and 90s ahead of year end. There have been double RSI 50 plus rebounds, which indicates strength.
- Prospex
Prospex had a decent RNS focused on production which gave the shares a bounce. The critical technical point is staying above the broken resistance line from February near 4p. If that holds I see scope toward about 6p by the end of next month or at least by year end.
- Pantheon
Pantheon remains worth a look. The 50-day is rising and the shares are consolidating around a rising trend channel. I am targeting around 36p by the end of next month after two RSI 50 rebounds, provided the stock holds above roughly 24 to 25p.
- Tooru
Tooru has hit the first target at the top of its falling trend channel near 0.24 to 0.25. An end of day close above 0.25 would be constructive and, with recent RNSes about supermarket rollouts, the share looks set for further upside while remaining above the 200-day line around 0.20. The initial break through the rising 50-day line on a gap higher was well received.
Key takeaways
- Major indices look constructive with clear upside targets into next month, but the usual caveats about momentum and headline risk apply.
- Bitcoin and Ethereum need to get their RSIs back above neutral and clear their 50-day moving averages to confirm the next leg higher.
- Gold staged a healthy retracement and remains in a positive consolidation above key support levels.
- Several bulletin board names are breaking out or rerating; watch moving averages, RSI 50 rebounds and end of day closes above key levels for confirmation.
Markets look set fair for now, but I remain vigilant for momentum shifts and the usual corporate news that can change the picture for small caps.
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.
