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Shares RSIs, highs and lows

A regular look at shares trading close to significant levels.

This morning's 5% move in Compass indicates a strong possibility for record highs in the future. Already overbought, the shares have crept up this particular leaderboard, as investors pile in following the news of a special dividend. After a move of this magnitude, we are likely to see a degree of selling, as has already been the case this morning; but so long as the longer-term trend in Compass is upwards, the bias remains towards further gains.

Supergroup, Balfour Beatty and Petrofac all continue to struggle this morning, with only the latter looking like it will exit oversold territory soon. The lesson here is that an overbought or oversold share does not necessarily indicate a sudden correctional move, and that shares can remain at relative strength index extremes for an extended period. 

Relative Strength Index (RSI)*

Company

Share Price

Oversold

Company

Share Price

Overbought

SuperGroup 1082 24.93 Salamander Energy 145 82.46
Balfour Beatty 226.5 25.49 BG Group 1263 81.26
Petrofac 1243 26.62 InterContinental Hotels Group 2203 77.72
Drax Group 639.5 27.65 Provident Financial 2111 76.47
Chemring Group 218 27.87 Compass Group 1026 75.93
Serco Group 347 27.93 Heritage Oil 315.2 74.86
Petropavlovsk 66.75 30.30 International Personal Finance 582.5 74.62

 

National Grid continues to show skittishness about breaking through its 52-week high, with results tomorrow likely to prove the deciding factor. Imperial Tobacco seems about to break through its own, however, sprinting towards £27, with a year-to-date gain of 13.4%.

Highs/Lows**

Company

Share Price

% off 52-week high

Company

Share Price

% off 52-week low

United Utilities Group 842.5 -0.06% Mothercare 162.5 1.40%
Imperial Tobacco Group 2657 -0.30% Dairy Crest Group 458.8 2.85%
Cobham 312.2 -0.45% Lonmin 260.9 4.44%
IMI 1564 -0.82% Experian 1075 5.39%
Heritage Oil

315.2

-0.85% Tesco 294.05 5.58%
Electrocomponents  301.8 -0.98% International Public Partnership 130.4 5.59%
National Grid 850 -1.05% WM Morrison Supermarkets 195 5.75%

 

*What is a relative strength index?

Relative strength index is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.

An asset is viewed as overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a candidate for a possible pullback. Conversely, if the RSI approaches 30, it is an indication that the asset may be oversold and may become undervalued.

**What is the significance of 52-week highs and lows?

One popular strategy is to buy when shares exceed 52-week highs and sell when they fall below 52-week lows.

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