#SP500 #FTSE At the tail end of last year, we cheerfully warned of impending damage to the FTSE 100, if our fears of a rash of profit warnings come to fruition. #Babcock International stepped up to the crease last week, a profit warning giving a rather predictable 20% dive in the share price. It shouldn’t take a brain the size of a planet to figure out where the UK index shall head, if a rash of companies start issuing negative news at the same time. Thankfully, perhaps even amazingly, if behaviour of US banks (so far) this Earnings Season proves an accurate guide, we may face the unlikely situation of the UK banking sector proving strong against the background of a foul market.
The immediate situation for Babcock share price is far from encouraging. Last Fridays grotty news has now propelled the share price below an uptrend since 2004 with the immediate situation looking as bleak as UK mortality rates. To be blunt, in the case of Babcock, it almost feels like the share price intends return to levels of stability last enjoyed a painfully long time ago. Continued travel below 195p threatens to provoke a cycle down to an initial 132p with secondary, if broken, at a longer term 55p.
Usually with the sort of thing, we provide a caveat, suggesting nothing threatens this at present. This would be untrue in the case of Babcock International, their share price looking as watertight as one of Britain’s new aircraft carriers, an unfortunate situation for such a major defence contractor.
Thankfully, there’s a pretty well defined path for shares to escape such a miserable doom. Firstly, we need the share price to close a session above Red on the chart, signalling the market is aware of the risks and intends correct the damage. Currently, this demands the share price close a session above 206p with such a scenario presenting the first suggestion is was all a dreadful mistake.
Secondly, the share shall need broadcast some sort of signal “bottom is in”. In this instance, we’ll raise an eyebrow should it start trading intraday above 237p. This is liable to prove a good thing, allowing for initial recovery toward 260p. If bettered, things become a little vague but 342p calculates as possible. In reality, we shall prefer taking a further look at the tea leaves, if 260p makes an appearance.
For now, Babcock is pretty messy and hopefully able to receive faster repairs than the UK’s ‘world beating’ leaky boats.
FUTURES
| Time Issued | Market | Price At Issue | Short Entry | Fast Exit | Slow Exit | Stop | Long Entry | Fast Exit | Slow Exit | Stop | Prior |
| 9:59:50PM | BRENT | 55.87 | Success | ||||||||
| 10:14:38PM | GOLD | 1840.4 | |||||||||
| 10:16:59PM | FTSE | 6733.04 | 6694 | 6651 | 6622 | 6744 | 6770 | 6793 | 6834 | 6722 | Shambles |
| 10:18:56PM | FRANCE | 5611 | ‘cess | ||||||||
| 10:22:24PM | GERMANY | 13856 | ‘cess | ||||||||
| 10:24:12PM | US500 | 3800.47 | 3779 | 3747.5 | 3720 | 3805 | 3806 | 3812.5 | 3834 | 3779 | Success |
| 10:26:33PM | DOW | 30939 | Success | ||||||||
| 10:29:11PM | NASDAQ | 13033 | Success | ||||||||
| 10:30:55PM | JAPAN | 28732 | Success |
