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Where now for UK banks' share prices as they trade at critical levels?

With UK banks earnings behind us, Lloyds, RBS, HSBC, and Barclays are all trading around crucial support levels.

UK banks have been in the limelight over the past fortnight, with earnings season having provided updates across the board. With the Bank of England (BoE) slowly showing their hand as a no-deal Brexit grows increasingly likely, the prospect of lower rates also denotes smaller margins for banks.

The prospect of a no-deal Brexit also points towards a likely economic decline, with investment and borrowing taking a hit as a result. However, this is a global story too, with the global growth slowdown continuing to play into market sentiment of banking stocks. With global markets hit hard over the course of the past week, we are seeing a number of these UK banks drop into major support levels that many will see as a possible buying opportunity.

Lloyds share price: technical analysis

Recent declines for Lloyds have seen the stock decline into lows last seen at the turn of the year. This has also brought the share price into a notable zone of trendline support, with two historical tentative trendlines (2-touches) meeting around the lows of the week.

The wider context shows a pattern of higher lows and flatlining highs, around 66.78p mark. That ascending triangle pattern remains in play if we see a turn higher from here. Otherwise, should we see a decline below this trendline zone and the 47.88p level, it would point towards a high likeliness of a strong selloff in response to the breakdown of this pattern. Watch for a break through the 20-level on the stochastic for greater confidence of an impending recovery.

RBS share price: technical analysis

A similar sell-off has taken hold for the Royal Bank of Scotland (RBS), with the company seeing seven-month lows this week. The wider trend evident since the turn of 2018 has been a bearish one, with the trend of lower highs continuing after the respect of trendline resistance back in April.

We have seen the stock move lower since, with the decline below 76.4% Fibonacci support pointing towards a high likeliness of a wider decline coming int play once again. In particular, we will need to see the £1.92 level broken to heighten expectations of a wider sell-off towards the £1.41 lows of 2016.

Barclays share price: technical analysis

Once again, we are looking at long-term trendline support coming into play here, with the Barclays chart striking significant similarities to that of Lloyds. The decline over recent months takes us within touching distance of the lower boundary of a symmetrical triangle formation. This is evident on the monthly chart, where we are approaching the apex of this pattern.

That longer-term view highlights the importance of current price action, with further losses raising the chance that we could see a wider bearish phase come into play. However, looking at the daily chart, the £1.46 support level is key for the upcoming trajectory of Barclays shares. With indecision candles forming, there is a good chance we could rebound from here. However, a break below £1.46 would signal a potential bearish continuation picture emerging.

HSBC share price: technical analysis

Finally, we have yet another company which is trading around a crucial support level, with the weekly chart highlighting the HSBC decline into trendline support. With the price clearly showing a more positive trend since the lows of October 2018, there is a strong chance that we will see the bulls come back into play. Given the recent retracement into a deep retracement (between 61.8% and 76.4%), a bout of upside looks likely for this highly international bank.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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