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, Avacta, Andrada, Capita, East Star, EnergyPathways, Itaconix, Integrated Diagnostic, Lexington, Mkango, and WH Ireland.
Across major indices, cryptocurrencies and a selection of small cap stocks the common thread is structure. Rising trend channels, moving averages and RSI readings are doing the heavy lifting when it comes to identifying likely outcomes over the next few weeks.
As always, do your own research and treat these as chart-based observations rather than hard recommendations.
Top level view
Technical traders will recognise the same toolkit showing up repeatedly. When a market sits above a rising 50 day moving average or a 200 day line, the balance of probabilities favours continuation higher. Conversely, a test of channel floors or long standing support warns of deeper retracements. Below I walk through the key charts and what the next meaningful levels to watch are.
FTSE 100
The FTSE is currently respecting a rising trend channel that stretches back to June. The nominal pivot sits around 9,880, with immediate downside support near 9,770. As long as price remains above that channel floor, the upside projection extends to roughly 10,150.
Practical takeaway: staying above the channel floor preserves the bullish case. A close below the floor would open up a re-test of prior resistance turned support around 9,770 and increase the chance of a deeper pullback.
DAX
The DAX has been a little slower to lift off after the recent dip, but it has already rebounded above its rising 200 day moving average around 23,420. A gap higher was filled and held, and the market is trading above last month’s broken resistance near 24,100.
- Near term upside: 24,800
- Year end target: 26,000
- Downside reference: the 200 day line near 23,420
RSI around the mid 50s leaves room for further appreciation. The technicals favour more upside as long as the 200 day line holds.
Dow Jones
The Dow has travelled steadily inside a rising trend channel that began in May of last year. It has recently struck the upper band and now projects toward a short term target near 49,200 if momentum keeps up. Conflict for the bears is the floor of the July channel sitting at roughly 47,500, which should act as meaningful support.
RSI strength and the channel structure point to more upside being possible rather than an immediate reversal.
Cryptocurrencies
Risk on in equities has not uniformly translated to the crypto complex. Bitcoin has retested the floor of its rising trend channel and needs to hold recent support near 98,000 to retain a constructive backdrop. Initial resistance to watch is around 106,000, with a near term test of the 50 day moving average near 111,000 on the roadmap.
Ethereum has been a little soggy but remains at and just below its 200 day moving average near 3,440. While it stays above the revised April uptrend line near 3,300 the bias is higher with a clear next hurdle at the 50 day moving average near 3,950. A break of the RSI resistance around the mid 40s would increase the chance of a run toward 4,500. The alternative downside target remains near 3,000 if momentum fails.
Gold
Gold has gapped higher and bounced off a rising 50 day line, a classic continuation signal. Initial resistance is visible near 4,400, with a secondary technical projection toward 4,610 and the one year resistance projection beyond that. The earlier rising trend channel from April now looks to be acting as support just below 4,000.
In short, the chart looks constructive and a trend-following approach would favour longs while the market remains above the 50 day average.
Selected small caps
Chart structure matters most with smaller names because sentiment and news can exaggerate moves. Below are the setups to watch in the near term.
Avacta
- Shares edging up inside a rising trend channel from June.
- Broken resistance near 74p now acting as support.
- Target in the channel: about 90p in the coming weeks.
Andrada
- Longstanding support near 2.5p looks to have held through recent weakness.
- Bear trap rebound from below the rising 200 day line is encouraging.
- Target: 4.5p plus by year end if the 50 day starts to lift.
Capita
- Recent RSI 50 rebound supports a continuation case.
- Look for potential news flow to catalyse moves.
- Best case scenario target: 430p by year end, with a caveat that a break below 300p would delay the rally.
East Star
- The shares have hit the top of a rising trend channel. Buyers may have anticipated a recent corporate announcement.
- Near term target: 2.75p. Upside extension towards 4p if we hold above the broken October resistance near 2.4p.
Energy Pathways
- Volatile chart but recent technicals are constructive. The shares broke a September resistance line around 4.9p and gapped through the 50 and 200 day averages into the mid 5p area.
- While price stays above 4.9p and the 50 day line, a retest of last month’s spike near 7p is a reasonable target.
Itaconix
- Quiet company but a clearly defined trading range between 102p and 140p.
- Key near term hurdle is the 200 day average, close to 117. A daily close above that would increase the chance of a move toward 140 by year end.
Integrated Diagnostic Holdings
- The chart has already hit the channel target at 63p.
- If the market sustains above the channel top, a steeper ascent toward 90p by year end is the upside case.
Lexington Gold
- Pushed above a rising 50 day line at roughly 4.40p.
- Top of the channel from October 2023 projects to around 6.40p over the next couple of months.
Gold strength often filters down to miners. Some small miners and developers are not showing the gains one might expect given the gold price. A persistent move higher in gold should provide additional lift to this group.
Mkango
- Shares have bounced off the floor of the rising trend channel from July.
- RSI has gone back above neutral fifty.
- While above the floor of the channel at 48p – looking to rest late October’s resistances around 65p by the end of this month.
WH Ireland
A previous technical projection anticipated 2.5p and the charting held up prior to takeover speculation. That illustrates how a simple chart signal can align with the timing of corporate events even without insider knowledge.
How to use these technicals
Keep the approach pragmatic. Here are a few practical rules based on the setups above.
- Respect trend channels Look to add on confirmations that price is respecting channel floors and topping bands rather than trading levels in isolation.
- Use moving averages as anchors The 50 day average is a short term continuation signal. The 200 day line is a longer term reference and often marks a meaningful change in regime.
- Watch RSI for confirmation A rebound through the 50 level often signals a continuation of the prior trend. Failure to lift RSI suggests limited upside momentum.
- Match timeframes Targets quoted here are short to medium term. Be explicit about your holding period and size positions accordingly.
Final thoughts
Market structure currently favours the bulls in a number of key areas provided critical supports hold. The indices are probing higher inside rising channels, gold has shown a constructive gap up pattern and several small caps are signalling continuation through rising 50 day averages. The caveat is always respect for the channel floors and the 200 day lines. A failure to hold those levels would require a reassessment of the bullish case.
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.
