Lloyds and RBS well positioned to see share price gains in 2020
The two domestically-focused UK lenders are well positioned to see their shares make gains in 2020, with the UK economy showing early signs of a pick-up in growth.
Royal Bank of Scotland (RBS) and Lloyds will release their full-year results next week, with the domestically-focused pair well positioned to see their shares make gains in 2020 after the UK economy begins to show signs of a pick-up in growth.
Last week, the Bank of England (BoE) opted to leave interest rates unchanged at 0.75%, despite early signs of the UK economy picking up.
‘To be clear these are still early days and it's less of a case of so far so good than so far good enough,’ Governor of the BoE Mark Carney said in reference to the health of the UK economy.
‘Although the global economy looks to be recovering, caution is warranted,' he said. 'Evidence of a pick-up in growth is not yet widespread.’
Lloyds and RBS: Technical Analysis
RBS and Lloyds look well positioned from a technical standpoint, with the two most UK-focused firms enjoying a more buoyant end to 2019, according to Joshua Mahony, senior market analyst at IG.
The weekly RBS chart below highlights the completion of a double bottom formation two-months ago, with traders driving the stock higher both before and immediately after Boris Johnson’s election win, he said.
'Given that break through resistance, the declines we are seeing over the past month look like a retracement before we turn higher once more,' Mahony added. 'The key level to watch here comes in the form of the 210p November low, which would point towards a wider retracement coming into play if broken.'
The forthcoming earnings release could see such a break occur, yet the wider trend remains bullish for RBS, with it appearing to be just a matter of time before the stock rallies once again.
The story is much the same for Lloyds, with the stock retracing back towards the 55p swing-low from November. A break below that level would signal a likely retracement of the wider rally from 48p coming into play.
'Ultimately whether we see such a bullish turnaround happen immediately or at a later point will be determined by whether we break that 55p level or not,' Mahony said.
'In either case, it is likely that the uptrend seen throughout the past three-years is set to resume before long, with this current period of weakness perceived as a buying opportunity.'
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