An 'uninspiring' stock about to enter a growth cycle?

Serco (LSE:SRP)

With both grand-daughters "enjoying" their obligatory bout of childhood Chicken Pox, it was easy to find inspiration for Serco due to our habit of circling manipulation drops with red circles.

Perhaps that's why Serco has been referred to as "that poxy company" and nothing to do with their apparent reputation...

Their share price has been pretty uninspiring for a while, but apparently anything now bettering 136p should enter a growth cycle to an initial 160p with secondary, if bettered, at a longer term 191p.

What's surprising about each of these target levels is that neither completely covers its matching historical gap, but instead falters about half-way up.

As a result, our inclination is to distrust this upward potential, at least until we see the share price actually close above 150p - the level of prior highs.

For now, the price appears to be playing a game of chicken with the red uptrend since 2016 and below 113p would justify quite a bit of concern, as this seems able to trigger weakness toward an initial 107p.

Secondary, if such a point breaks, comes in at around 97p and should prove capable of generating some sort of bounce. We'd advocate extreme caution if 97p breaks as it becomes possible the price shall challenge the prior lows around the 80p mark.

What's worse, from our perspective, is if anything were to allow the share to close below the 80s we become unable to comfortably calculate any future bottom without prefacing it with a minus sign.

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.