Of course, one would not want to dignify the rumours going on around Twitter and other stock market gossip forums on Tuesday. But it would appear that it may finally be time for the bears to give Burford Capital something of a kicking, and perhaps even more than many investors who have been happy to buy on dips have become used to.
One of the rules of the stock market is that the stronger the trend, the rougher the ride, something that Fevertree (FEVR) shareholders have had to get used to of late. However, another rule suggests that the most resilient bull runs tend to end in the most dramatic of ways. The latter is what we may be seeing at Burford. Perhaps the best case scenario at this stage is that there will be a minimum test of support from the beginning of last year at 1,000p and then the stock will rebound back to at least 1,300p former neckline support. After that we could be back in a 1,300p – 1,800p range of the type which has dominated over the past year.
Unfortunately, the worst case scenario would suggest that there could be a 700p decline from the 1,300p neckline break. This implies a target as low as 600p.
That said, an end of day close for Wednesday below 1,000p would risk 600p if only because the stock is trading in the aftermath of a May dead cross between the 50 day and 200 day moving averages. The longer we stay below 1,300p the greater the 600p risk becomes.