Blue-chip chart breakout imminent

It's not often the subject for our report is inspired by the weather but... things seem to be coming together for Royal Sun Alliance. As the chart shows, the share has a blue line since 2013 and we've become interested in recent price moves in relation to the downtrend.

Essentially, a degree of care has been taken to ensure the price does not close above 'blue', which results in a situation now where closure now above a rather pedantic 498.279p should trigger moves to an initial 525p with secondary a longer term 664p.

Obviously, from a day trading perspective, this is less than useful for anyone planning a quick smash and grab. We feel even an intraday mid-price in excess of 501p (Note: a spike at the open does not count unless bettered within 90 minutes or so) will signal coming moves to an initial 525p.

Of course, if insisting on playing safe, waiting until intraday traffic betters 510p - the prior intraday high against the trend - ticks the final box if following the doctrine of Higher Highs.

However, this is the stockmarket and there is no such word as "safe", so all we can do is pile up logical arguments and hope for the best.

What was interesting against RSA was the plunge back in February as this both confirmed an uptrend since the age of the dinosaurs and betters still, it exhausted the weakness imparted by the circled gap nonsense. While the situation now is a threat of anything below 373p leading to 288p as a bottom, visually it appears unlikely.

Amongst the insurance sector, we are seeing quite a few shares "bubbling under" with this sort of behaviour, so perhaps this lot are worth watching in the near future.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.