Shares RSIs, highs and lows

A regular look at shares trading close to significant levels.

Mothercare’s results this morning have given the stock a lift, rising 10%, after the company said it had been able to give itself more room on debt facilities. It also reported earnings ahead of expectations. Still, ongoing pressure for the company remains, and the bleak company outlook mentioned in its results suggests that today’s move higher is based more on a closing of short positions rather than the beginning of a sustained rally.

Vedanta Resources has rallied yet again, moving further above £10 a share. There is significant buying pressure at work here, and the share price seems close to breaking above its November high.

 

Relative Strength Index (RSI)*

Company

Share Price

Oversold

Company

Share Price

Overbought

Mothercare 162.5 22.69 United Utilities Group 857.5

75.37

Drax Group 603 22.89 Salamander Energy 143.5 74.94
Chemring 209.5 23.12 Severn Trent 1928 74.00
Balfour Beatty 223.8 23.81 Heritage Oil

315.5

73.62
Kenmare Resources 10.5 24.63 National Grid 884 72.94
Lancashire Holdings Ltd

621.5

25.10 Vedanta Resources 1090 72.44
Renishaw 1634 25.15 InterContinental Hotels Group 2215 71.62

 

I have expanded the list of companies near their recent highs and lows, to give us a clearer picture of market activity. We can see that the rally in Bunzl has continued, although the shares now seem stuck in a range around £16.40 - £16.90. High street bookie William Hill remains under pressure, although it has bounced for a second time from near the 320p level. Even a short-term rally would run into descending resistance, as the stock has made a series of lower highs since the beginning of August 2013.

Highs/Lows**

Company

Share Price

% off 52-week high

Company

Share Price

% off 52-week low

United Utilities Group 857.5 -0.52% Experian 1024 0.39%
BP 508.3 -0.55% Dairy Crest Group 456.5 2.33%
Heritage Oil 315.5 -0.75% Intertek Group 2885 3.48%
InterContinential Hotels Group 2215 -0.76% Dignity

1364

4.36%
Imperial Tobacco Group

2690

-0.85% International Public Partnerships 129.9 5.18%
Bunzl 1677 -0.89% Meggitt 470.5 5.73%
Royal Dutch Shell 2382.5 -0.94% UBM 654.5 5.74%
Reckitt Benckiser 5070 -0.98% Informa 492.3 6.14%
National Grid 884 -1.12% William Hill  334.9 6.45%
AZ Electronic Materials SA 403.25 -1.83% Kenmare Resources 10.5 6.49%

 

*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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