NatWest shares and a fly in the ointment

14th February 2022 07:57

by Alistair Strang from Trends and Targets

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The government has sold more of its stake in the bank, says independent analyst Alistair Strang, who mulls the direction of the share price.

News over the weekend regarding the UK government stake in NatWest (LSE:NWG) coming close to falling below 50% surely must provide some confidence for the share price. The threshold could be crossed in the coming weeks, doubtless with a fanfare.

However, news that the bank intends to close another 32 branches has leaked. The whole issue of branch closures is unsurprising, it proving remarkably easy to avoid going into a bank during the last couple of years.

Closing last week at 253p, the share price now requires to exceed just 259p to introduce the prospect of coming price recovery to 272p next. If bettered, our secondary calculates at a longer-term 332p. At least it seems fair that the UK government are choosing to drip-feed into the marketplace and avoiding further damage to the share value. We are certainly curious, if the fact of NatWest no longer being referred to as the 'Majority Owned Bank, NatWest' in every news broadcast will provide a boost for the longer term.

The immediate fly in the ointment comes from the relative lack of strong growth against the price. It's certainly exceeded its pre-Covid high, has gone up a bit, and stopped. While it's certainly a combination of the Russia/Ukraine Thing, the Interest Rate Thing, or the Inflation Thing, we are starting to wonder if the share can be expected to suffer some reversals fairly soon.

Below 244p looks troubling, allowing for weakness to an initial 227 with secondary, if broken, at 215p. Visually neither number appears troubling, as the share price would need to close a session below 207p to justify serious alarm. A move such as this would threaten a retreat below the blue downtrend, once again making a trip down to 155p a truly disturbing possibility.

Source: Trends and Targets. Past performance is not a guide to future performance.

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 or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.

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