Chart of the week: Three for the bulls

The Brexit affair is having a huge effect on many shares, but not on others. I showed a few last week. But one such share that was little moved is Serco which I featured on 13 June.

I noted that sentiment towards the company was surely at rock-bottom with a string of corporate disasters hitting confidence. And that is usually a situation that stirs my contrarian juices! I happen to believe in the age-old maxim to "buy low, sell high" as a path to wealth. Many traders seem to believe the opposite.

I showed the incredible "Serco rollercoaster" chart where the share price has zoomed up to the 700p level, then crashed down to the 100p area. It then did what all rollercoasters do - zoom back up to the 700p level and then crashed back down again to the 100p area, where it has languished for some months as it was forming an ending wedge pattern.

This is what I wrote:

With this bullish setup, I expect a prompt test of the initial 220-240p target zone. But if the market immediately falls back below the 100p level (on Brexit worries?), that would probably indicate a test of the upper blue line at around the 90p area and should set up a kiss and scalded cat bounce.

In fact, the market did drop to the 95p level post-Brexit, but then staged a recovery and is trading around the 110p level this morning.

I believe this resilience in the face of massive initial Brexit selling is a clear demonstration that there is good underlying support at around current levels. Here is the updated daily chart:

And what a cracker of a kiss! When my blue trendline was broken to the upside last month, with a large opening gap, it heralded a move up because my trendline was a line of resistance, which became a line of support with the break.

And when Brexit broke, that enabled the market to back down to plant a kiss on the line and then embark on a scalded cat bounce.

So now, the market appears poised to make further strides towards my main target in the 220-240p area.

Shire also in a kiss

I recently covered Shire and became bullish on it - but Brexit hit it for six, with a sharp sell-off to a low in the 3,800p area. Unfortunately, that almost certainly took out a lot of stops. That is the price one pays for using protective stops.

The market has recovered since then and it's trading around the 4,700p level this morning.

But what a great example of how to act professionally. Instead of licking your wounds and going into a shell, a careful reassessment of the situation would have probably encouraged you to re-enter the market - especially when you glanced at the near-kiss on the chart!

The market was in a support zone.

And here is another interesting chart in Sage Group, which I covered recently as a great example of a share in a solid bull trend.

This is the daily chart and shows the Brexit fallout was minor - and the market quickly recovered. The market should continue in this vein unless the Brexit low of 570p is broken. Otherwise, I see no reason to change my bullish stance.

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.