Barclays shares poised for more losses

The Covid-19 crisis continues to weigh on British banks, with Barclays share price poised for more losses despite its strong rally last month.

Barclays looks set to break lower, as the retreat from 110p goes on. Rising trendline support from the March low at 73p has allowed higher lows to form over the past eight weeks, but the current four day drop has now begun to test this line.

‘Since the rebound began in mid-March, the price has twice attempted to break above the 110p area,’ Chris Beauchamp, chief market analyst at IG said. ‘Both attempts have ended in failure, with the area remaining as resistance. The present move lower brings 85p and 80p into view, the previous higher lows on the way up.’

The reversal over the past four sessions looks like the downtrend is resuming, a view reinforced by the potential bearish crossover in the daily MACD, something that has not happened since late February. To provide a more bullish view, the price needs to reverse and take out 100p, reclaiming the 50-day SMA (99p) in the process.

RBC rates Barclays as ‘sector performer’

Analysts from RBC Capital Markets believe that Barclays will emerge from the Covid-19 crisis in a relatively healthy position, with the investment bank reiterating its ‘sector performer’ rating for the stock earlier this month.

RBC also gave a target price for Barclays of 110p, implying a 13.4% upside for the stock based on the lender closing at 97p per share on Thursday.

Barclays braces for Covid-19

The impact of Covid-19 crisis came quite late in to what had been a relatively good first quarter for Barclays. Statutory pre-tax profit came in at £900 million for the British lender, with pre-tax profit (excluding credit impairment charges) sitting at £3 billion for the quarter.

The bank allocated £2.1 billion credit impairment charge to offset the rise in bad loans driven by the coronavirus pandemic. But despite the economic fallout from the outbreak, Barclays management remains optimistic that the bank will successfully navigate the crisis.

‘Barclays is committed to supporting its customers, clients and the UK economy through the crisis,’ Barclays Group CEO Jes Staley said. Despite the macroeconomic downturn caused by the COVID-19 pandemic, the Group’s position remains robust, reflecting our diversified business model.’

How much does it cost to buy UK shares with IG?

There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

Spread betting CFD trading Share dealing
Action Buy £160 per point Buy 16,000 share CFDs Buy 16,000 shares
Capital required to open £2000 £2000 £10,000
Total fees £20.88 £20.88 £16

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Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.

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