The usual rule with perennial underperformers is to leave well alone. It is almost impossible to call the bottom, and even if you do, the process can take so long as to barely be worthwhile. However, at least in the short term it could be that “Dogs” Drax, ITV and Marks & Spencer could be due a share price revival. What should be remembered however, is that from a fundamental perspective all three stocks are in sectors in “long goodbye” mode, with only the remote hope of a takeover when their stock price becomes so cheap delivering the possibility of putting these companies out of their misery.
In the case of Drax, the market yesterday appeared to take cheer in the rise in quarterly earnings, and in the aftermath of the Iberdrola deal. The question is whether all of this will end the extended decline in the shares so far this year. Bulls will take heart from the gap higher through the 50 day moving average at 290p. Such gap signals are usually very reliable and at least while above the 50 day line we can look to an intermediate rally towards the January resistance line at 340p.
It is a sad indictment of the ongoing decline of the space which broadcaster has created for itself, that despite blockbusters such as Downton Abbey, and the even more mannered Love Island, the share price of ITV has continued to decline. But like Drax described above, we have been treated to a chart gap higher through the 50 day moving average, in this case at 109p. While above this feature a push back towards the 120p’s is expected, possibly as high as the zone of the 200 day moving average at 129p over the next 1-2 months.
It would be entirely disappointing if the £1m M&S has paid to the irksome Holly Willoughy was actually paying off as far as its summer range. One would hope that there are other factors at play as far as the falling wedge break higher on the daily chart. Whatever the case may be a continued rebound to the 50 day moving average at 220p would appear to be the minimum on the upside, with the possibility while above the 203p July floor we see a move to the June peak at 232p over the next month.
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