Shares RSIs, highs and lows

Chris Beauchamp takes a look at shares trading at significant levels.

InterContinental Hotels has surged again today, pushing it into overbought conditions, after an enthusiastic reception to results last week. Meanwhile, the rest of the list is almost entirely populated by oil companies, two of which are actually bid targets, while the third, Salamander, is likely to become one in due course. If these bids were to collapse the shares could fall rapidly.

Balfour Beatty’s profit warning and news of the chief executive officer's resignation caused the shares to plummet. The construction sector is not exactly booming, but neither is it in a slump, so the update is somewhat embarrassing. Consultant WS Atkins is struggling too, as results failed to excite the market. The shares are now below the 200-day moving average too, giving back all the gains made since November.

Relative Strength Index (RSI)*

Company

Share Price

Oversold

Company

Share Price

Overbought

N Brown Group 466 18.68 Salamander Energy 142.75 87.49
Chemring Group 218 19.48 BG Group 1265 85.84
Balfour Beatty 224.8 22.14 InterContinental Hotels Group 2226 82.12
Serco Group 355.1 25.84 Premier Oil 350.2 75.92
WS Atkins 1267 26.83 Heritage Oil 314.7 74.46
CSR 544 27.21 Royal Dutch Shell 2360 74.15
Paragon Group of Cos 362.1 30.62 Provident Financial 2090 73.06

 

We have seen little change in the list of those shares trading close to 52-week highs or lows, but Mothercare’s arrival on the latter list should be a cause for concern for shareholders. The 150p level should provide some support, followed by the 2011 low around 120p. The company needs more time to meet its banking obligations. Coupled with news of fresh negotiations with suppliers, the result is that the firm is now a real bid target, for those looking to acquire either the UK sites, or its profitable overseas operations.

Highs/Lows**

Company

Share Price

% off 52-week high

Company

Share Price

% off 52-week low

Provident Financial 2090 -0.10% WM Morrison Supermarkets 189.2 0.11%
InterContinental Hotels Group 2226 -0.27% Mothercare 162.25 0.31%
AZ Electronic Materials SA 403.1 -0.47% Tesco 284.95 2.32%
United Utilities Group 812.5 -0.49% Dairy Crest Group 463.9 3.99%
National Grid

843.5

-0.71% Experian 1061 4.02%
Royal Dutch Shell 2360 -0.88% International Public Partnerships 129.7 5.02%
Heritage Oil 314.7 -1.01% UBM 655.5 5.90%

 

*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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