BARCLAYS - Clear As Day - Buy @163p
REASONS TO BE BULLISH
- Technical - Recently broke out of a 15 year pennant pattern and just retested for support.
- Technical - Recently crossed and reclaimed the 50 MA.
- Technical - MA 50 looking like it may cross the 100 and 200 in future months.
- Technical - RSI is in the bull zone (bouncing off its base).
- Technical - A 155p entry was triggered when reclaimed MA and RSI bull-zone on the same candle. We're now at almost the same level.
- Technical - All-time high was back in 2007. This stock hasn't been touched in 15 years and is now winding-up to revisit the top of the upwards slanting trend-line.
- Technical - Looks like wave 1 of a 5-wave move is complete/near completion.
- Fundamentals - Price to earnings is just 4.7. Barclays is looking like incredible value right now. Net earnings up 275% for the year.
- Fundamentals - Dividend yield is ~4% - not to be sniffed at all in this environment - they may even increase this given how profitable banking with current accounts may turn out to be if the BOE base rate continues to increase.
- Fundamentals - Implied volatility in the options market is increasing, and it seems like some big players may be eyeing-up Barclays for a big position (likely long but perhaps short).
- Fundamentals - Less exposed to the U.K. than some of its counterparts (like Lloyds). With U.S. and India appearing in their Top 4 countries in terms of investment.
- Target 1 - First target would be reaching the underside of the purple channel once more at 260p or £2.60. A 60% move off todays prices.
- Target 2 - Next profit target would be 750p or £7.50 (a 4.6x move). That could be attainable fairly quickly in the next decade on current trajectory. I don't normally like to post timescales but I am curious to see how this one plays out.
- Target 3 - The white top line coincides with the 2.272 and 2.414 fib extension (from Mar20 to Mar22). This generates an ultimate price target of between £10.50 (1050p) and £17.30 (1730p). This matches with the extension from the height of the pennant (top to bottom) also.
REASONS TO BE BEARISH
- Technical - Below the purple bear channel and not showing signs yet of being an 'exponential' candidate.
- Technical - Stop loss will be 140p at the prior low - representing a 12.5% risk.
- Technical - Only recently broke out of the pennant pattern. Could still reverse from here.
- Fundamentals - Inflation is not usually too good for growth and banks, with costs increasing as well as profits from interest rates.
- Fundamentals - With interest rates increasing you'd anticipate that defaults and leverage will unwind in other economies and wreak havoc. Perhaps Barclays have repaired their balance sheet in the last 15 years or perhaps the UK government will continue to backstop, but current market conditions don't make for pretty reading.
SUMMARY
Buying Barclays here seems like a no-brainer here. Significant dividends in a stagflationary environment cannot be ignored. Neither can we ignore a reasonably priced stock in 2022, as well as a successful backtest of multiple breakouts on our indicators/TA. Time to keep an eye on this one.
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