Vodafone buy opportunity triggered

Price at time of writing – 206p.

My previous Vodafone update on 13 May was prompted by my earlier buy recommendation achieving its minimum target price of 192.8p.

The update suggested taking profit and adopting a neutral stance, with the shares likely to endure a period of sideways trading within parameters defined as 189-205p. And so it proved. However, in that update I also suggested the next major buying opportunity would occur on any break above 205p, where a new and higher trading band would be established, with an ultimate target price of 289p. On the back of last week's announcement of a major corporate restructure, this opportunity has now been triggered.

The two most important levels on any chart are the G1 and G2 lines. These are determined as 50% of the all-time high, and the midway point between the all-time high and the all-time low, respectively. In the case of Vodafone, these two lines reside at 201p and 205p, and have been acting as major resistance on the chart for over a decade now. Last week's break above 205p therefore has major implications for the share price.

Vodafone's shares formed a major low in October 2008, some months ahead of the stock market indices more generally. The initial move from this low met resistance following a rise of 50%. Once breached, however, a rise of 100% to my former target price of 192.8p was activated. A further 'doubling' of this rise to one of 200% can now be activated, and forms the centre-stone within a line of three tightly aligned percentage projections. A strong rise in Vodafone's heavily-weighted shares will also have positive implications for the FTSE 100.

Recommendation: buy. Target 289p. Stop-losses can be activated on weakness beneath 189p.  

Vodafone Group plc chart

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