Ted Baker: A contrarian trade?
5th December 2018 08:55
by Alistair Strang from Trends and Targets
Founder and CEO of this mid-cap fashion chain Ray Kelvin is in the news for all the wrong reasons, sending Ted Baker shares below the uptrend since 2009. Chartist Alistair Strang assesses possible outcomes.
Ted Baker (LSE:TED)
Ted Baker has a bit of a problem. With the share price recently carrying out experiments with gravity (gravity won!) it finds itself in the unenviable position of closing below the uptrend since 2009. We're not yet convinced it has kicked open the gates of hell though.
First, there's the problem at 1,370p. To convince it was entering a fairly serious drop cycle, the price needed actually to close a session below 1,370p. As it completed the session on the fourth at 1,420p, despite an intraday low of 1,312p, it fails to tick this particular box.
However, there's instead the "threat" of any trend break shall prove short lived with a miracle recovery ensuing.
Moreover, there is a very real risk of traffic now below 1,312p allowing for travel down to an initial 980p. If broken, secondary calculates at 582p.
The interesting thing about the secondary is it's the lowest we can calculate. Quite literally, we cannot compute anything sane below this level - quite a high number in the grand scheme of things and one which probably reflects the esteem the market holds the company in.
Should we take the stance of the trend break proving a mistake, the price need only better 1,470p to enter a near term cycle to a useless 1,509p. The key element about such a target will be, if bettered, there's a good chance it has bottomed for now, thus allowing for 1,682p.
At the 1,682p level, things become really strange with a taste of "gotcha, suckers". Essentially anything beyond such a level looks like entering a longer term cycle to 24 quid.
For now, as the chart inset shows, it's in dangerous territory but despite opportunity, has not yet confirmed a readiness to fall.
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.
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