Is Aberdeen Asset primed for 'rapid acceleration'?

Aberdeen Asset Management (LSE:ADN)

One of the great pleasures of long daylight in Scotland comes from two purple lights in a box. Evenings are punctuated with sharp "cracks" when midges immolate themselves.

We fear rather a few investors face a similar fate as they experience a dangerous fascination with low share prices in the oil sector. We'd advocate some caution if hunting bottoms unless they tend to coincide with Brent crude at around the $47 point.

Aberdeen Asset Management was one of our ISA basket back in February. At the time we mentioned the share, the price was 265p and at time of writing it’s now at 286p, with a high in the intervening period at 310p.

Crucially, though, the share has failed to actually close above 300p and, instead, seems to have invented a private glass ceiling for itself just below 300p.

Another aspect relating to its lack of useful performance is shown (badly due to scale) of the price's recent performance since it managed to ooze above the downtrend since 2015.

The share price, in an astonishing dance of truly random proportions, has spent the last 21 sessions hugging the thin blue line on the chart while descending gently from 300p.

What does this mean?

Generally, we take this behaviour to suggest a price is either awaiting positive news or being affected by overall market conditions, not being allowed to run free until conditions resolve themselves.

In the case of Aberdeen, it also means that, should the share now trade above 300p, we'd expect some fairly rapid acceleration to an initial 334p with secondary a very probable 368p.

Importantly, by making a transit through the blue line, the price is supposed to be now insulated from the threat of a bonk against the 2002 uptrend - currently 168p. The share price would be required to drip below 227p to suggest running shoes.

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.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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.