Barclays under attack from chartists

Barclays avoided falling into government hands during the credit crunch by taking billions from Middle East money men. It came back to the market with a £6 billion rights issue two years ago at 185p, and the share price has done little to excite since.

Earlier this week, and after turning negative a few months ago, technical analyst John Burford issued a warning on Barclays. "I believe the 2009 low at the 50p level will be tested in the next twelve months or so," he wrote in an exclusive article for Interactive Investor. Ouch!

Now, fellow chartist Alistair Strang at Trends and Targets has run the software and reached his own conclusions. Here's what Alistair has to say about Barclays' increasingly ugly chart pattern:

BARCLAYS completes our week of shares "doing nothing". Alas, a tiny little problem has appeared as it's done something before our report appeared! The share has a Long Term downtrend which is currently at 274p. It also has a Long Term uptrend which was at 232.08p at the open of business on 5th November. With a burst of magic (aka suspicious market activity) the share price was gapped below this trend before trading was permitted to commence. Usually we're quite chuffed at seeing one of our trend lines confirmed in this manner as it 'proves' we've been mapping the correct forces. But in this case, an uptrend since the crash of 2009 was always going to be obvious. However, we've given a little inset on the chart showing how the price moved during the session as it was almost spiteful - 1. Gap the trend, 2. Back test the trend, 3. Pretend to close the gap, 4. Achieve a lower low.

The question, obviously, is simple. The market has decided Barclays' recovery trend has failed. From our perspective, this means weakness now below 227p expects an initial 219p with secondary 214p. At this point we glance at a chart to try and figure if there's any convincing reason to expect a bounce at a target level. Oddly, there's a pretend trend from the lows of 2014 and we'd expect sufficient numbers will be capable of drawing such a Light Blue line and will watch to see if Barclays approaches it. Simply put, this matches our 214p for the next few weeks, so perhaps makes sense.

And that is the end of the good news.

Barclays is now trading in a region where it just ticked the first box in a series of arguments favouring an ultimate bottom of 151p. Crucially, the last box needing ticked is closure below 200p and we're not convinced this is going to happen.

A pattern of market behaviour against several shares in the last few months has been something new and illogical. When a price is gapped below the trend, it's just a mite too blatant. Recently we witnessed Lloyds gapped ABOVE a long term downtrend and allowed to flourish for a couple of days. Then 'they' gapped it back below the trend and have been trashing the price since. The lesson from this movement strategy is simple. It's worth taking a few days breathing space before being convinced Barclays share price is really in trouble. In fact, if the market chooses to manipulate the price (gap) at the open back above the BLUE line, we'd expect the converse of the Lloyds experience to occur. Aside from the detail it's going down, there's been a series of impressive arguments favouring Barclays making some recovery. Critically, any bounce needs better 249p or so to exceed the immediate downtrend of 2015.

It makes us question the integrity of the current drop. Hopefully next week will give some answers, but if the market gaps Barclays above BLUE and 232p at the open, initial movement to 249p makes a lot of sense.

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