Zak Mir takes a charting look at some of the most closely followed small caps on the London Stock Exchange. Today’s charts are the FTSE 100, DAX, Dow, Bitcoin, Ethereum, Gold, WTI Crude Oil, Alkemy, Central Asian, Dialight, Greencore, Hardide, Harena, Ocado, Optima, Sealand, and Thalia.
Markets are still having to contend with a surging oil price, but the main indices are holding up rather better than might have been expected. The broad theme remains one of recovery attempts, with plenty of charts sitting at or just below important resistance levels.
As always, do your own research and treat these as chart-based observations rather than hard recommendations
The key is to distinguish between a market that is simply bouncing and one that has confirmed a breakout. End-of-day closes, rising moving averages, and the RSI moving back above its neutral 50 area are doing much of the heavy lifting across this selection.
Major indices: resilience despite the oil spike
FTSE 100 needs to clear 10,620
The FTSE 100 is still dithering below resistance at 10,620. That is the immediate line which needs to be beaten on an end of day closing basis before getting too excited about the upside.
There are encouraging features underneath the price action. RSI has bounced from the neutral 50 area and is now in the mid 50s, while the index remains above a rising 50 day moving average. Those are the ingredients of a market that still wants to probe higher, even with oil heading through the roof.
The best case is a move towards 10,750 by the end of next month. On the downside, the main floor remains around 10,420, at the base of the rising channel in place since March.
DAX holds the channel floor
The DAX is doing a more impressive job against the backdrop of higher oil prices. It is attempting to hold the floor of its rising March trend channel.
While above 24,700, the obvious target is a gap fill towards 25,000, potentially over the next couple of weeks. That would be roughly another 500 points higher.
If the market does break down instead, the favoured support area is the rising 200 day moving average at 24,362. For now, holding the channel floor keeps the bullish recovery case alive.
Dow Jones recovers 52,000
The Dow slipping back beneath 52,000 was a slight concern earlier in the week, but the index has managed to reclaim the June support line. Above 52,000, the focus is on the July peak around 53,300.
That looks like the natural upside limit for the immediate move. If oil spikes further and the Dow breaks down again, the 50 day moving average at 51,300 would be the favoured pullback level.
The RSI rebound from just beneath 50 is another small plus. It is not a runaway bullish signal, but it is enough to support the recovery case while the key price level holds.
Crypto: Bitcoin improves while Ethereum remains sluggish
Bitcoin has broken 65,000 resistance
Bitcoin has cleared recent resistance around 65,000, although it is still stalling below the mid June peak near 67,000. That is the next important hurdle.
A break through 67,000 would open the way towards 72,000, an old support area from May that sits close to the 200 day moving average. Before then, a move into the 70,000 zone would be a sensible expectation if the 50 day average continues to curl higher over the next day or two.
The important point is the change in momentum. The 50 day line is trying to turn upward, which would give the market a stronger technical base for an assault on the higher levels.
Ethereum needs more consolidation
Ethereum remains a rather dead market compared with Bitcoin, but it has at least regained the 1,850 neckline area. That former resistance should now act as support.
The first upside objective is old May support around 1,970. A more ambitious move would take the price to the 200 day average near 2,166, but that still feels a long way away.
For the moment, Ethereum probably needs more consolidation between 1,850 and 1,950. The 50 day average has started to point higher, which may provide some positive momentum through the rest of the week, but there is no need to overstate what is still a tentative recovery.
Gold and WTI crude: recovery versus a market that is boiling away
Gold targets 4,200 to 4,250
Gold has snapped well through the 4,030 resistance area, which had been capping the price earlier in the month. The next resistance sits around 4,200, where the upper boundary of the falling wedge comes into play.
The best case is a move to the 50 day moving average at 4,250. What is particularly encouraging is the RSI heading rapidly back towards 50, a level it has not approached since early May. A clean move through that neutral threshold could bring decent follow through towards 4,250.
WTI crude remains firmly bullish
WTI crude is still boiling away. The market has reached the upper boundary of its falling trend channel around $86. A sustained break above that level would point towards $96, although the more cautious target is the June high around $94.
The bullish case remains intact while crude holds above its rising 50 day average at $83. RSI is approaching overbought territory, but this does not yet look like a move that has run out of steam.
Even more notable is the rising 200 day average at $75. That line has continued higher despite crude’s earlier decline from the $120 region, which suggests the longer term technical picture is still constructive.
Small-Cap Shares on the Radar
- Alkemy Capital: a bear trap gap reversal: Alkemy has been in recovery mode for the last three or four weeks and is now above a rising 200 day moving average at 312p. Above that level, the target is the top of the triangle at 378p, potentially by the end of next month. The gapping activity is the standout feature. There was a gap down in June, followed by a gap up earlier this month and another gap higher overnight. That looks like a bear trap gap reversal, normally a strong technical setup.
- Central Asia Metals: a messy W pattern with positive momentum: Central Asia Metals has broken neckline resistance from June at 142p. While above that level, the next upside objective is around 160p by the end of next month. The turnaround pattern may be a slightly messy W, but the key technical signals are clear enough. RSI has bounced above 50 and the shares have cleared the 50 day moving average without any difficulty.
- Dialight: unfilled upside gaps support the bullish case: Dialight has produced several unfilled gaps to the upside, including gaps in May, last month and again now. More importantly, the shares have repeatedly found support above a rising 50 day moving average. That is usually the sign of a strong bull market. The target is 522p by the end of next month, provided the latest gap floor at 410p holds. Above all, the shares need to remain above the rising 50 day line.
- Greencore: 241p is the confirmation level: Greencore has regained old support around 217p, with a gap floor at 222p and the current intraday low near 229.8p. The immediate bullish target is the top of the recent range and the top of the rising channel base at 272p. A more cautious approach would wait for an end of day close above the 200 day moving average at 241p. That would provide the cleaner confirmation for a run towards the higher target.
- Hardide: strong support above the 50 day average: Hardide has one of the stronger looking patterns in the group. It has unfilled gaps to the upside, support points above a rising 50 day average and a gap through resistance. That combination is normally a very good sign, provided the breakout holds. Resistance at 80p has been cleared, and the top of the channel comes in around 117p. That is the target to watch by the end of next month.
- Harena: DFC funding changes the picture: Harena has received a $5 million non dilutive cheque from the DFC, which is plainly positive news after a period in which the market had not fully bought into the company story. Technically, the shares need to remain above the 200 day average at 2.45p. If they do, the minimum target is the top of the recent range at 3.3p by the end of next month.
- Ocado: 189p breakout points to 210p: Ocado has performed well from support around 166p and is now above the resistance line drawn from August last year at 189p. That breakout gives the shares scope to test the 200 day moving average near 210p, even if the price then fades after reaching that level. The 189p area is the one to hold if the recovery is to remain credible.
- Optima: gap fill first, then 228p: Optima has broken through recent resistance at 198p, with the 200 day moving average sitting just below. That is a decent setup. Above 198p, the initial objective is to fill the gap at 213p over the coming days. The best case is a move towards 228p by the end of next month. The previous rally found support entirely above a rising 50 day moving average, which gives the current move the potential to develop into something more substantial than a one day spike.
- Sealand Capital: waiting for a close above 0.28p: Sealand Capital Galaxy has a substantial support zone around 0.22p. The hope is that the latest move is the definitive one, but the confirmation required is an end of day close above 0.28p on a mid price basis. If that arrives, the target is the top of the falling trend channel from last summer around 0.4p, potentially by the end of next month.
- Thalia: a step progression higher: Thalia is one of the more interesting smaller share charts. It has produced a step progression higher, first through a gap up and then through a break of recent resistance at 0.67p. Above that level, the top of the range at 0.9p is the target. The shares have found support above a rising 50 day average without needing to test it, while the 200 day average is rising too. That is exactly the sort of background that supports a continuation move.
What matters across the charts
The repeated technical themes are straightforward. Markets and shares look strongest where they have:
- Cleared a clear resistance or neckline level on a closing basis.
- Held above a rising 50 day or 200 day moving average.
- Seen RSI recover through or bounce from the neutral 50 area.
- Produced upside gaps that remain unfilled.
- Stayed within, or broken above, an established rising channel.
There are opportunities on the upside, but most of these charts are sitting at important decision points rather than offering a free run. The sensible approach is to keep the relevant support and confirmation levels front and centre. A breakout that holds is one thing. A brief intraday push that fails by the close is quite another.
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.
