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, WTI Crude Oil, Capricorn, Eleco, Fonix, JD Wetherspoon, LPA, Oriole, Pensana, Reach, Shaires, The Mission Group.
The market remains fairly subdued in places, but there are still plenty of charts sitting at important inflection points. The broad message is cautiously constructive for the FTSE 100 and the US Dow, while the DAX remains more of a range trade. Bitcoin and Ethereum are trying to improve, gold is struggling to convert a potential breakout, and crude oil continues to edge higher.
As always, do your own research and treat these as chart-based observations rather than hard recommendations
Among individual shares, there are several interesting recovery and breakout patterns, particularly in Capricorn Energy, Fonix, LPA, Oriole Resources, Shires Income and The Mission Group.
FTSE 100: Holding the March Breakout Zone
The FTSE 100 briefly looked as though it might clear 10,750, the initial July resistance level, but it has backed away for now. That leaves the index trading in a fairly tight range between 10,620, which marks the broken March resistance line, and 10,750 above.
A sustained move through 10,750 would reopen the route towards the all time highs. That might seem counterintuitive given oil’s strength and the difficult geopolitical backdrop in the Middle East, but the chart structure remains constructive.
The upper boundary of the rising channel, originating in March, points towards 11,000 by the end of the summer. On the downside, the lower boundary sits around 10,420, which is the key floor to monitor.
The RSI picture is encouraging. There have been several rebounds from the neutral 50 area in recent weeks, while the index is also holding above a rising 50 day moving average. Those ingredients suggest that the market remains biased higher, or is at least setting up for another upward push.
DAX: A Slow Market With Defined Levels
The DAX is not in quite as convincing a position as the FTSE 100, although it has bounced around and just below its 50 day moving average near 24,900. That is a reasonable enough sign in a market which has been remarkably inactive for several months.
The immediate support area is the floor of the March channel, near 24,700. While the index holds above that level, the next upside destination is the top of the recent gap at 25,500.
The RSI is hovering either side of neutral 50, so it is not offering much of a directional clue. If the market suffers a proper rug pull, the preferred downside area is the 200 day moving average at 24,300.
Dow: 52,000 Is the Important Support
The Dow has been all about the 52,000 level. It held above that area for consecutive sessions, and the adjusted support line from the middle of last month is still doing its job.
As long as the index remains above 52,000, the main upside target is the July resistance near 53,300. On the downside, the preferred worst case support is the April uptrend line and the 50 day moving average, currently around 51,300.
The RSI remains on the right side of neutral 50, which is another modest positive. A more cautious approach would wait for a break above approximately 52,600, but that may be overcomplicating what is, for the moment, a rather dead market.
Bitcoin and Ethereum: Improving, Even If Momentum Is Slow
Bitcoin needs to clear 67,000
Bitcoin is lingering near recent resistance at 67,000, around the mid June barrier. The market is effectively boxed between that resistance and the rising 50 day moving average at 63,100.
The setup is beginning to look better. A decisive push through 67,000 could create the momentum needed for another attempt at the 200 day moving average around 72,500. RSI in the upper 50s supports that more constructive view.
The working assumption is that dips towards the rising 50 day average may offer a long opportunity, with the 200 day line acting as the target. It may be a slightly optimistic stance, but there is little point in remaining endlessly pessimistic if the chart is showing signs of improvement.
Ethereum holds above former resistance
Ethereum has a similar, though slightly stronger, pattern. The key point is that it is trading above the old mid June resistance around 1,850. While it stays above that former peak, the next target is the 200 day moving average near 2,160.
The rising 50 day moving average is important here because it indicates that recent price action has strengthened. That gives the recovery a better chance of developing into a continuation move rather than merely another short lived bounce.
Gold: A Breakout Is Needed, but RSI Is a Warning
Gold has recently behaved in an unusual way, falling when the geopolitical picture worsens and rising when it improves. The overnight weakness leaves the metal below the main resistance band around 4,200 to 4,240, which is the upper boundary of a falling channel or wedge dating from late January.
The important breakout level is 4,020. A move above that former resistance line would provide the potential entry signal. However, gold has suffered another RSI failure around the neutral 50 level, and that is disappointing.
That RSI action suggests the market may already have achieved the best of its immediate rebound. Unless the chart improves, there remains a risk of a move back towards 3,900, the former late October support area, or lower.
WTI Crude Oil: Breakout Above $87
Crude oil continues to edge higher and has broken out of its channel above $87. As long as the market can hold the $87 to $88 area, the bullish case remains intact.
The next major target is the old June resistance near $97. That would be a substantial move, and it would underline the impact that renewed conflict involving Iran and the wider region can have on the oil price.
UK Shares to Watch
- Capricorn Energy: Gap Through Resistance: Capricorn Energy has produced a particularly attractive setup after gapping through resistance. Such gaps through resistance often remain unfilled, and that is the hope here. While the shares stay above 340p, the channel points towards 412p by the end of next month. Ideally, the price remains above the previous day’s resistance around 363p. It is a very decent-looking pattern.
- Eleco: A Close Above 122p Would Improve the Picture: Eleco is bouncing from the bottom of its range following a positive update. The immediate requirement is a close above the 50-day moving average at 122p. Above that, the top of the triangle formation from November offers a target near 145p by the end of next month.
- Fonix: Gapping Through 155p Resistance: Fonix also had a positive update and has gapped through resistance around 155p. Above that level, the top of the November and December triangle pattern points towards 186p by the end of next month. The working assumption is that the lows are in and the worst may be over, although the shares need to retain the breakout.
- JD Wetherspoon: Bounce From the 200-Day Line: JD Wetherspoon saw a markdown, but the dip buyers stepped in, as they often do with more blue-chip names. The 200-day moving average around 667p was the obvious buy point, and the initial bounce has been encouraging. There is a gap to fill towards 739p. That remains the target while the shares stay above the previous day’s opening price around 700p, also an important support area throughout much of July.
- LPA Group: Boeing Distribution Deal Supports the Breakout: LPA has had a decent announcement concerning a deal with Boeing Distribution and has gapped through the previous 77p target. Above 77p, the 2024 resistance-line projection is around 90p, potentially in the coming days or by month-end. A move towards 92p is possible if conditions remain favourable. The key is to behave above 78p.
- Oriole Resources: A Gap Above the Rising 50-Day Average: Oriole Resources has upgraded its JORC resource to £1.66 million. The shares have bounced from a rising 50-day moving average and gapped above it. While the price holds above 0.34p, the chart points towards 0.45p by the end of next month.
- Pensana: Oversold at Channel Support: Pensana is at the floor of a falling trend channel dating back to December, around 60p. That may offer a potential buy point, although the safer support area is arguably the old June and July support from last year around 53p. For momentum traders, the signal would be an end-of-day close back above the initial July support at 63p. The shares are oversold, so a bottom may not be too far away, but the low-50s area remains the more conservative level to monitor.
- Reach: A Possible Falling-Knife Setup: Reach fell sharply and is now retesting the lows. The shares are also in oversold territory. There may be a final flick towards 40p, but this is the sort of area where those willing to catch a falling knife may consider a recovery trade. It is not a market for the faint-hearted, but the chart is at least near an area where a meaningful bounce could begin.
- Shaires Holdings: Golden Cross and a 45p Target: Shires has a golden cross in place and appears to be heading towards the top of a rising trend channel. The target is as high as 45p by the end of September. The bullish view remains valid while the shares stay above recently broken resistance in the 19p to 20p zone.
- The Mission Group: Back Above the 200-Day Average: The Mission Group had a good update and has recovered back above the 200-day moving average around 17.75p. Above that level, the next challenge is the main 20p resistance zone. A clear break there could put the shares back in business for 26p by the autumn. The important risk level is the 200-day line, where a fresh break lower would weaken the recovery case.
Key Levels at a Glance
- FTSE 100: Support at 10,620, resistance at 10,750, upside channel target at 11,000.
- DAX: Support at 24,700, upside gap target at 25,500, deeper support at 24,300.
- Dow: Support at 52,000, resistance at 53,300, worst-case support near 51,300.
- Bitcoin: Support at 63,100, breakout level at 67,000, target at 72,500.
- Ethereum: Hold above 1,850 for a possible move to 2,160.
- Gold: Breakout trigger at 4,020, resistance at 4,200 to 4,240, downside risk towards 3,900.
- WTI crude: Bullish above $87 to $88, with $97 the next major resistance target.
The broad message remains reasonably constructive for equities and crypto while the stated supports hold. Gold still needs to prove itself with a breakout, while crude oil remains one of the more compelling upside charts provided it can maintain its position above the recent breakout zone.
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.
