Direct Line could be forming a large topDirect Line Group continues to trade within a medium term downtrend. In the last couple of sessions we have seen a rejection at the medium term trend resistance line and also the top of a range that has developed over the past few months.
This rejection is likely to trigger a move to the lower end of the channel at 332p.
332p is a huge support level that has held since July 2015. If this breaks to the downside, then I would expect to see a sharp move lower as large top pattern completes.
The shares rank towards the bottom of my fundamental model, scoring poorly on growth and profitability metrics.
My trade today is to sell on the open.
Target 1 is for a move to the bottom of the range at 332p, then if this breaks look for a move towards 245p over the medium term.
Stop loss on the trade is at 374p
