Interactive Investor

How far will Mears' stock fall?

16th August 2017 09:51

Alistair Strang from Trends and Targets

Mears Group (LSE:MER)

Recently Mears attained a degree of notice and now, with Monday's notification regarding profits, it seems the market may have a cunning plan.

The share price closed at 485p yesterday, and when we woke this morning it presented itself at 452p. By most standards that's a fairly substantial forced downward movement, of 6.8%, before any trading actually took place. It seems the market wants to bring this down.

As the session progressed, the price closed at 445p, establishing itself pretty firmly on a track toward 356p, which is a pretty big problem. When we scrawl a crayon mark on a chart, the calculated immediate drop target on this cycle is below the uptrend since 2011.

While there's a pretty good chance the red line will provoke some sort of bounce, when our software says 356p following this sort of forced downward motion, it tends to prove itself correct.

Additionally, when we view the lows of 2016, there's a good chance some sort of bounce can be anticipated should 356p make a guest appearance.

The real problem is a little more complex. If our calculations prove correct, it's absolutely critical 356p should not be broken as the price risks a seriously sharp period of reversal toward 205p eventually.

This sort of calamity brings the share price into a dangerous region below the uptrend since the year 2000 and basically gives hope for a serious bounce when punters spot it has matched the lows of 2011.

To get out of this mess, the company needs their price to better the blue line on the chart, currently 495p.

About the only hope we can dangle near term will be a rough calculation which advises if above 475p, there's a good chance the drop was overcooked. For now, though, our suspicion is of 356p appearing.

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.

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