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Over the last few weeks I have written about Banks, Ranges and Results. All three have been popular topics for trading clients. So how about a write-up combing all three. The FTSE Banks have begun to report their results for the first quarter of 2019, and, low and behold, several of them are trading within ranges. A triple trading whammy!
Barclays kicked things off this morning. And the numbers weren’t as well-received as CEO Jes Staley would have liked. Revenues, profits and profitability fell more than expected. Echoing US peers, the more profitable investment banking unit also had a tough quarter. Furthermore, at a group level (including the retail bank), some metrics related to Capital and Returns failed to inspire. This may provide more ammo for activist investors to fight for a say in the boardroom.
As the most investment banking-exposed of the FTSE Banks, competitors may be more insulated. That said, at home, the UK has its own woes for Retail and Commercial activities (read Brexit). So keep your eyes and ears open for when peers publish: RBS Friday 26 Apr, Standard Chartered Tuesday 30 Apr, Lloyds Thursday 2 May and HSBC Friday 3 May. Previews so far warn of margin pressure from a competitive mortgage market, still low interest rates. Oh, and RBS’ CEO resigned today after 5-6 years, so succession will be in focus tomorrow.
But what I really wanted to write about was Ranges. Results are interesting; real trades are so much more exciting.
Barclays (160p; see above) has traded back from the ceiling of a 4-month 155-170p range. Whilst the opportunity to capitalise on 9% downside may have passed (we’re two thirds of the way through the fall already), we are monitoring the shares for signs of support around 155p in order to re-highlight to clients the possibility of another 9-10% bounce in the range.
Similarly, RBS (249p; see right) has dropped back from 266p, pretty much completing a 7.5% pull-back from last week’s highs, in a far-from-perfect 246-265p 2-month range. Today’s CEO resignation – he who helped the bank restructure so much – helped nicely.
Lastly, HSBC (660p; see right) has seen its shares checked by prior highs, potentially in the early stages of a correction following a 10% rally 610-670p. Whilst it may not fall all the way back to 610p (intersecting support possible at 630p) this still offers a 6% ‘dropportunity’ which may have only just begun. Or will it buck the sector trend of ranges?
My point here, and one I probably mention rather often, is that results season is important, but it’s not like shares do nothing between quarterly updates. Shares trade up and down, sideways, perhaps bouncing within ranges or breaking out with momentum. Results makes up just 4-8 days of the 250 available trading days a year.
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Think ranges (horizontal, rising, falling), candidates for a rebound (or a sell-off), shares on a breakout (or breakdown), those displaying signs of momentum (positive or negative) and names reporting results or paying dividends.
We cover it all. Every day. All part of the service. So you have more time to do the finer things in life.
Mike van Dulken, Head of Research, 25 April 2019
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.Prepared by Michael van Dulken, Head of Research