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, Alkemy, ASA International, Delta Gold, Kistos, Kendrick, MedPal, Neoterra, Oxford Biodynamics, United Oil & Gas.
Markets went into the holiday period in a generally constructive mood, and in several cases the charts are finally doing what they looked as though they wanted to do weeks ago. There are still a few missing ingredients here and there, especially on momentum, but the broad picture across indices, crypto, commodities, and a handful of small caps is more positive than it has been for a while.
As always, do your own research and treat these as chart-based observations rather than hard recommendations.
Major indices
FTSE 100
The FTSE 100 has managed to break above the falling March trend channel, which comes in around 10,610. That is the first key positive. Once a market gets out of a declining channel like that, the next natural objective is a retest of the prior highs, and in this case that points to the February record area at 10,900 plus.
That target also ties in with the top of the broader rising trend channel that has been in place since last October, so it is a level with more than one technical reason behind it.
If there is any rug pull from here, the expectation is that the downside should be limited. The 50 day moving average is rising at 10,392 and should act as support. On an end of day close basis, a move below that would be disappointing. Until then, the setup still looks like it wants to go higher.
DAX
The DAX also had a constructive week, pushing through a resistance line from May around the 25,000 area. That breakout has been a long time coming, and now the focus turns to the top of the March channel.
The chart target here is around 26,300 by the end of the month, possibly sooner if momentum picks up. If there is a pullback first, then 24,700 looks like the favoured destination, with the 50 day line and the floor of the channel both lining up there as support.
Dow
The Dow has behaved as it often does into Independence Day, with a celebratory tone. Price is now pressing against the top of the rising trend channel from April. If the index can push through 53,000, then the next objective looks like 54,000, based on the projection from the November resistance line.
On the downside, recent support near 51,400 is the area to watch. For now, the bias remains to the upside while that support holds.
Crypto
Bitcoin
Bitcoin produced one of the more encouraging chart developments of the week by breaking out of a falling wedge. The key level there was around 61,200, based on the line from May. That breakout opens the door to the 50 day moving average and June resistance at 67,000.
There is also a supportive momentum signal in play. Into the end of June and the beginning of July, price made lower lows while RSI made higher lows. That bullish divergence often appears around turning points, and in this case it suggests at least an intermediate rebound is underway.
If there is a pullback, the downside looks limited to roughly 57,000 to 58,000 in a worst case scenario. The only real missing ingredient at the moment is RSI getting properly back above the neutral 50 level for the first time since early May. More cautious traders may want to see that before getting too excited.
Ethereum
Ethereum has almost reached the initial target that was in play, namely the area around 1,815 to 1,850. That zone combines the 50 day moving average with the top of the falling channel from late April, so it is not surprising that price is hesitating there.
The key level in the near term is 1,753, which had been old support from February. Trading back above that is a positive. Momentum is also in better shape than before, with RSI through neutral 50 and up to around 55, which is always helpful.
While Ethereum stays above recent broken resistance around 1,640, the chart still looks bullish.
Commodities
Gold
Gold has not been especially impressive over the past few months, but the picture is improving. The market is now above recent broken resistance around 4,110, and that starts to bring the February resistance line into play as a target.
That points towards 4,337 by the end of the month if the recovery continues. The cautionary note is that RSI is still below neutral 50, so confidence is not fully back yet. There is progress, but it still needs follow through.
WTI crude oil
Crude has perked up after a gap fill rebound around 67.83. That has improved the near term setup, and above that level on an end of day close basis, the next target becomes the 200 day moving average at 74.16.
The chart has clearly become more constructive, even if the broader backdrop remains frustrating for anyone hoping lower crude would mean much relief at the petrol pumps.
Stock charts to watch
- Alkemy: Alkemy has had a painful time since late February, with the rug very much pulled from under it. The shares even ended up testing support from last October near the £2 area. The encouraging part is that there has been a reasonable rebound from there. There is bullish divergence on the chart, with a lower low in July but a stronger RSI reading. Price is also back above former June support at roughly £2.16. That combination suggests recovery potential towards the 50 day moving average at 283p by the end of the month, possibly sooner.
- ASA International: ASA International is showing a fairly straightforward consolidation breakout. The shares have moved above a sideways range while both the 50 day and 200 day moving averages are rising underneath. The minimum target from that setup is 308p, which corresponds with the top of the rising one year trend channel. That could be reached over the next week or two, and because the pattern is a sideways consolidation above a rising 50 day line, there is room for an even stronger move if buying pressure builds.
- ATC Music Group: ATC Music Group is not one that attracts much attention, but the chart is quietly constructive. The shares are sitting in a rising trend channel and holding above the rising 50 day moving average, with support points continuing to build. That leaves scope for a bigger move higher, with £2.30 as the target by the end of next month or possibly earlier. Ideally, the shares stay above recent broken resistance around 172p.
- Delta Gold: Delta Gold has held up better than some may have expected. The shares bounced from the floor of the rising trend channel and avoided a slide back to the £1 area, which had looked like a risk for a while. Now the stock has closed the week well above a rising 50 day moving average. The next step is an end of day close through £1.55 resistance. If that happens, the way opens for a retest of last month’s best levels through £2. In a stronger scenario, and assuming the stock is allowed to get on with it, a move towards £2.40 by the end of next month is possible. The obvious bearish alternative would be a retest of the £1 area, but even in that case the broader uptrend would still look capable of resuming afterwards.
- Kistos: Kistos has broken through not one but two nearby resistance levels, first around £2.40 and then around £2.65. Clearing those barriers improves the technical picture quite a bit. Above £2.65, the immediate objective becomes a retest of May resistance through £3. On a slightly longer view, the top of the rising trend channel from late last year comes in around £3.50, which could be seen by the end of September if the current recovery keeps going.
- Kendrick: Kendrick ended the week on a softer note. For the first time since May, the shares slipped below the 50 day moving average. That was a bit of a shock, and it changes the short term picture. The easy technical requirement now is an end of day close back above the 50 day line at 6.44p. If that happens, the shares could recover towards 8p by the end of the month. If the weakness continues, then the previous downside target around 5.2p comes back into focus, with old May support at 5.75p sitting just above it. RSI has also failed a couple of times below neutral 50, which increases the risk that the shares drift toward the 5p zone rather than stabilise above 6p. Even so, the 50 day line is still rising, so it is not an entirely one way bearish setup.
- MedPal: MedPal has been interesting because even after a fairly chunky £5 million raise, the shares managed to stay above the raise price of 3.5p. That in itself is a useful sign of resilience. There is old resistance from April around 3.55p, and that area was tested on Friday. While the shares remain above the 50 day line at 3.1p, the chances of a return to 4p plus look reasonably good. For those who prefer more confirmation, the extra signal would be RSI getting back above 50. It is around 48 at the moment, so that would probably come with a push through roughly 3.75p.
- Neoterra: Neoterra, formerly Altona, is trying to establish a floor after a very sharp decline from the highs seen at the end of April. The hope at the moment is that 1.9p holds as support. If that level breaks, the next support area looks closer to 1.6p. If 1.9p does hold and the shares bounce, then the near term rebound target is 2.3p by the end of the month. At this stage, the chart is all about whether a base can form. Hold the floor and there is recovery potential. Lose it and another leg lower becomes hard to avoid.
- Oxford BioDynamics: Oxford BioDynamics has been a difficult chart, and the longer term trend remains firmly negative. Even so, there is a hint of bullish divergence at the floor of the falling channel around 0.08p. That gives some room for a rebound towards the top of the channel, near 0.11p, by the end of the month in a best case scenario. It is still a countertrend setup, so it needs to be treated with caution, but there is at least a technical case for a bounce.
- United Oil & Gas: United Oil & Gas finished the roundup on a surprisingly firm note. Despite a £500,000 fund raise, the shares actually closed higher on the day, which tends to suggest the market may be anticipating better news ahead. There is a possibility that the long awaited farm out is approaching, and if that is the case then the shares may still be heading for 0.28p at the top of the rising price channel from late December. That target could be achieved by the end of the month. There may be a little wishful thinking in that view, but the recent price action, especially around the raise, does suggest participants in the placing may have confidence in the timing of what comes next.
Where the charts stand now
The overall tone going into summer is firmer than it has been. The FTSE 100 and DAX have broken through notable resistance, the Dow is pressing higher, Bitcoin has finally shown some life, and crude is attempting to rebuild after its latest pullback.
Among the smaller stocks, there is the usual mix of fragile rebounds, breakout attempts, and stories that still need a great deal of patience. The better looking charts are the ones combining three things:
- Breaks of established resistance
- Support from rising 50 day moving averages
- Improving RSI or bullish divergence
Where those ingredients are present, the setups are generally worth respecting. Where momentum is still lagging or support is under pressure, a bit more caution is sensible.
For now, the balance of evidence remains tilted to the upside in quite a few places.
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 to 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.
