Although it is supposed to be the case that the more liquid stocks are best suited to predictive technical analysis, it can be seen from the daily chart of power station group Drax that this is not necessarily the case. Indeed, in the recent past there have been a couple of recovery attempts which came to nothing.
However, the latest rebound which has taken the shares back to the 50 day moving average at 282p does seem to have some credibility in terms of being a potential trigger to a lasting turnaround.
This is said on the basis of the sharp bear trap from below the June floor at 260p, and the bullish divergence in the RSI window. All of this goes to suggest that if we are treated to a weekly close today above the 50 day line, we should be treated to a follow on move towards the top of a broadening triangle drawn from June at 340p. While this may sound optimistic, even if the extended bear run continues, an intermediate rally to such levels is possible as it would only be up to the 200 day moving average and take the shares back to where they were in May.
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.