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BT Dials Up 52-Week High
By FT on November 12, 2009 | More Posts By FT | Author's Website
This morning BT’s results, together with an optimistic outlook, sent shares to a new 52-week high. Shares look overcooked on the day, but could be heading higher in the medium-term.
BT pleased investors with stringent cost-cutting delivering core earnings in line with forecasts, accompanied by a hike in its future free cash flow targets and a 5% dividend increase. Shares are currently up 13p at a new 52-week high of 150p.
Making a new high for the year is considered bullish for the share price and this is backed up by a bullish chart pattern. Today’s move has seen a breakout of an ascending triangle dating back to last December; the cunning theory here is that a break-out should (could) lead to a price rise equal to the fall from the first point in the triangle to the first point on the rising diagonal. In this case it suggests a rise of around 70p from the breakout point; ie a target of around 210p.
Hang on; there’re a few ‘ah buts’ before getting too excited:
1) I had to use a weekly chart to show this pattern. That should give a clue about how long this triangle took to play out. By the same token the 210p target should be seen as a medium to long-term objective; things don’t always happen as quickly as in the forex market.
2) The same theory used above reckons on a pullback to test the horizontal line before heading for the sunny uplands.
3) This would tie in with the fact that today’s move is overcooked; the daily RSI is at 74 and the price is currently 5p outside the upper Bollinger band.
A pullback to 140-142p might see me enter a cheeky long bet, if the support line holds.
EURUSD
Nothing too deep here; just pointing out a cheeky little head and shoulders pattern on the 30-minute chart. This isn’t a classic pattern as this guy looks to have three shoulders, but I’ve taken the far-left as the shoulder (the bit in between looks like a broken collar-bone).
If this chart plays out we could be looking at EURUSD back to $1.4860. The rule of thumb here is to take the price difference from the top of the head to the neckline directly below it and take that balance from the price where the neckline is broken.
The chart isn’t big enough to show the potential fall, but my back of envelope calculation gives a rough and ready 100 pip adjustment; taking that from the break at $1.4960 gives a target of $1.4860 (ish).
Is there a caveat? Too right there is. As with most TA the pattern allows for a move higher to re-test the neckline resistance (this gives the pattern more validity); this happened almost immediately so I’m not sure if that was the ‘proper’ retest or whether we’re due another one (this might depend on how equities play out this afternoon).
The neckline currently coincides with the falling 21-period moving average so a sell here with a stop 10 pips above the neckline wouldn’t be too daft.
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I was going to get excited until you stated the “ah buts”. The chart was a little misleading, but thank you for the clarification. The EURUSD graph does look like a head and two shoulders, though.