National Grid – a question of trendlines

National Grid bounced sharply from its March lows, but now faces trendline resistance from recent highs.

For a ‘boring’ utility company, National Grid has certainly seen its fair share of stomach-churning volatility over the past two months, according to Chris Beauchamp, chief market analyst at IG.

The shares gapped higher following the UK election, rallying from £9.22 to a peak of £10.60 by mid-February of this year. But the decline was swift and brutal, taking them to a ten-month low of 800p.

There was a glimmer of hope however, as the shares rebounded from this level as they bounced off the rising trendline from the February 2018 lows, which held in December 2018 as well.

From there they surged to 900p with rising trendline support from the March low helping to stem any major downside during the weakness of early April.

Now the price must break through trendline resistance from the early March highs at £10.50. The late March bounce hit 980p and then fell back, leaving the price below the (falling) 50-day SMA (959p). A fresh challenge of this trendline would likely develop around 920p.

A breakout above this resistance targets 980p and then £10.50. Alternately, a break below the March trendline support would require a move below 880p, which might then bring 835p and then 800p into view.

National Grid closed at 898p a share on Thursday.

National Grid leaves full-year dividend on the table

Earlier this month, National Grid said that before the economic fallout of Covid-19 it had expected its financial performance for the year to be in line with its previous guidance.

But investors will have to wait until mid-June for the energy company’s full-year results and to get an insight into the impact of the virus on the business, with its reporting timetable having to be pushed back as a result of the outbreak.

‘Our primary focus is on our people, our customers and operations as we look to manage the impact from the Covid-19 outbreak and meet our obligations to provide essential services to our customers,’ National Grid said in its statement. ‘Our teams have swiftly and successfully implemented our business continuity plans, which are working well across our businesses.’

‘This is enabling us to assess impacts on our capital delivery programmes day by day to maintain safe working environments for our teams.’

The company is likely to be negatively impacted by weaker demand amid the coronavirus pandemic, which has forced offices and factories to close. However, investors will take solace from the fact that National Grid’s management, unlike other FTSE 100 companies, is still hoping to issue a final dividend to shareholders.

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