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Zak`s Daily Outlook
Following Through - August 16th
Following Through - August 16th
It was all a question of follow through for the major indices on Thursday, but have they really cracked those one month resistance bands that in the case of the FTSE 100 are just above 4, 300 and for the Dow 8,750? Is this still all a bear squeeze rally? Even if it is not, the upside may be limited. In the case of the FTSE 100 say only another one hundred points or so. For the Dow up to 200. Of course, this is nothing to be sniffed at, but it is worth thinking about. Consolidation rather than outright gains are really the watch word.
In fact for me the acid test will be whether the Nasdaq can get above 1,350. Old economy indices can and do have the ability to overshoot on the upside due to interest rate cut hopes. But for tech stocks this is not such a big deal. An end of week close for the Nasdaq above 1,350 would be a very strong signal that a genuine rally was underway.
Arcadia
Arcadia (AG.) is obviously one of those stocks, the rally in which everyone wished they had spotted early on. The move higher from around 40p was spectacular and grew out of an extended saucer base formation like the one that can currently be seen on gold and the dreaded Lastminute.com (LMC). But now that Arcadia is up here and the retail boom is supposed to be cooling off, what are its shares going to do?
As things stand Arcadia seems to have bounced off the two year uptrend line and is therefore ready to revisit all time highs at 400p. However, I would sound one note of caution. Last year’s resistance area was 290p -300p and it could very well pose one or two problems again. Therefore, we may have to wait for an end of week close above the level just to indicate that there is still life in the retailer.P&O
P&O (PO.) is not normally the type of stock that grabs my attention, but it has to be said that anything that has held its own (sort of) in the face of the FTSE 100 sell off is definitely worth investigating. Unfortunately, it is unclear how long the shares will be able to hold their own on a fundamental basis given yesterday's news that its P&O Nedlloyd joint venture could be over $160 million in the red. The prognosis for the group’s shares from the charting perspective is rather mixed.
One could argue that we have good 2002 support around 205p and that we had a decent double bottom from these levels last month. However, the bears would argue that the rally towards 240p was just a token gesture and this is the last bullish gasp for the shares before the long term downtrend line starts to reassert itself. In addition, we also have the issue of the broken short term uptrend line that can be drawn from September’s lows. This cracked last month and therefore it is relatively easy to say that this month’s move higher was just testing that trendline from below. So we are really 60 percent pointing down and 40 percent up. The only way to really tell will be an end of day close above 230p or below 200p. View current share price for FTSE IndexSee what people are saying about FTSE Index
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