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, Artemis, CleanTech, East Star, Empyrean, Image Scan, Poolbeg, Surface Transforms, Team Internet, Watches of Switzerland, and Zenith.
The FTSE 100, DAX and Dow have all bounced into nearby resistance and, while there is scope for further upside, the next few daily closes will tell us whether this is a genuine breakout or a retracement. Cryptocurrencies are rebounding more slowly than hoped, and gold remains range-bound.
On the small-cap side, there are several interesting setups across resource and tech names that I will run through below.
As always, do your own research and treat these as chart-based observations rather than hard recommendations.
Major indices
FTSE 100
The Footsie looks to be enjoying a strong rally and has hit the top of a rising trend channel from June, around the 9,900 level. An end of day close above 9,900 would open the door to an acceleration higher, with a stretch target of about 10,180 by year end. The recent bounce came off an uptrend line established last month near 9,640. A pullback to around 9,720 is possible, but while the index stays above that level the breakout scenario toward 10,000 remains intact.
DAX
The DAX has been trying to transmit some of the market cheer but is bumping up against resistance close to the 24,000 area. It is trading above the rising 50 day moving average which sits just below 24,000. An end of day close through 24,000 should set up a retest of October resistance near 24,800 later this month. On the downside there is a gap to fill toward 23,800 and a worst case retrace to the 200 day moving average around 23,400.
Dow
The Dow has bounced above its rising 50 day line and the RSI is back above 50, giving a continuation signal. The early target is the recent best levels around 48,000 and the top of the May 2024 channel near 48,300 by the end of the month. If momentum fails the most likely support to retest is the 50 day line at about 46,400.
Cryptocurrencies
Bitcoin
Bitcoin’s rebound has been slower than some hoped. The long term uptrend from March held at a bounce near 98,000, which was also a June support area. Initial upside targets are in the 111,000 area and the 50 day moving average, which sits just above the 200 day line at about 110,000. The safer approach is to wait for the RSI to move back above neutral 50; it is around the mid 40s at the moment. Support near 100,000 is the floor of the channel to watch. Best case while above that floor is a move up toward the 130,000 area, the top of the range.
Ethereum
Ethereum has been a weaker version of Bitcoin recently. It is struggling at old support around 3,700 and there is a real risk of another test of the 200 day line near 3,429. Below that the falling trend channel from August projects toward about 3,060. The RSI needs to break above its trend line to convince us a significant upside is coming. At present the RSI sits in the mid 40s, so more work is required before calling a breakout.
Gold
Gold is still consolidating in a fairly narrow range between roughly 3,920 and 4,050. An end of day close through 4,050 would be constructive, with resistance beyond that seen near 4,160. However, I still see the risk of a test of the 50 day line, around the 3,892 area, before the market can properly take off.
Selected stocks to watch
Below are the mid and small cap names I am tracking. For each I note the technical trigger levels and realistic targets over the next few weeks to months.
Artemis Resources: Artemis has produced a tidy move above a rising 50 day line and the RSI has rebounded through 50. While the RSI remains on the right side of 50, an initial target of 0.65p by the end of the month looks reasonable on an end of day close basis.
CleanTech: Positive company news around an expanded Laguna Verde resource is a helpful catalyst close to the lows. The share price has bounced above a rising 50 day line. Break 6p and the path is clear to the top of the range and the 200 day moving average at about 7.9p, potentially by the end of the month.
East Star: Bounced off the floor of a rising trend channel that has been in place since last November. If momentum holds the top of the channel toward 3p is attainable by month end, provided the shares stay above recent broken resistance around 1.95p.
Empyrean: Tends to produce one day wonder moves. The recent action saw a break through the 200 day line and resistance near the 0.9p zone. If that upside sustains, the top of the rising trend channel suggests a scope to the mid teens of pence, but remember this stock is volatile and often moves in single day bursts.
Image Scan: has won a contract and has reached the 200 day line at the top of a falling trend channel. While above recent broken resistance at 1.5p the next realistic target is around 2p, with the caveat that the 200 day line is still sloping down.
Poolbeg: Has been a bit quiet on its oral GLP1 workstream, but the chart is constructive. The stock has pushed through a rising 50 day line and is testing the top of its range and channel. A move toward about 5.5p by the end of the month is possible if the breakout holds.
Surface Transforms: Was a market hero earlier in the year and put in a strong rally back in September after bouncing off the channel floor around 1.9p. A clean end of day close above the 50 day line at roughly 2.3p would open a path toward about 3.44p by year end.
Team Internet: Is promising a corporate rejig. The price made lower lows in November, but the RSI has traced higher which suggests momentum could push the shares up toward the top of a falling trend channel, potentially as high as 58p, even if that proves short lived.
Watches of Switzerland: Gapped higher today, clearing both the rising 50 day moving average and the 200 day line around £4. Since mid September the RSI has produced multiple bounces above neutral 50, which already foreshadowed the gap higher. That momentum could be enough to push toward the top of the rising trend channel from May, around £5.57 by year end.
Zenith: Has an uptrend in the RSI and looks to be moving into uranium exposure. The recent price action created a bear trap island reversal, a strong setup where the stock gapped down then gapped up. Minimum resistance sits around 4.1p from January. Best case, with positive momentum behind the uranium story, is a move up toward 7 to 7.75p by year end.
Summary and trade management
Overall the major indices are leaning bullish but key daily closes are required to validate breakouts. Bitcoin and Ethereum need stronger RSI confirmation before I would increase exposure. Gold is range bound and could test its 50 day line first. On the smaller stocks, there are several compelling technical setups, but many are volatile and should be traded with strict stop management and an eye on daily closes above or below the levels mentioned.
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.
