Shares digital

GlaxoSmithKline (GSK)

Having been somewhat premature in our bullish tip of the drug maker last September, when we anticipated that the market, having recovered the share price to above the long-term bull trend line (the rising line at the bottom of the price chart), would mount a test on the opposing bear trend line which has capped up moves since late 2000. We had not expected a sharp spike down and were duly stopped out. Nevertheless the spike has likely cleared the air by shaking out any remaining weak holders and heralded a sharp up move. In doing so it has placed a bottom formation on the chart that could be interpreted as an inverse head and shoulders pattern which points to a target of £15.06, coincidental with strong congestive resistance that has resisted over the last 18 months. Such a move would break above the aforementioned bear trend line and in doing so suggest a new long term trend in the shares. Short term, a correction to test the ‘neckline’ would negate this positive stance.

BUY at £13.61 • Stop Loss £13.20 • Target £15.06

AstraZeneca (AZN)

The other ‘big beast’ in the pharmaceutical sector has also been in decline now for over a year, having lost over 40% of its value since October 2006, which in money terms is a huge amount. However, pan out a little and you begin to see that in the longer run the shares have actually been trading a range with the downside limited to £18.30 since October 1998 and gains above £36.60 allusive on all upside tests since 2000. Looking at more recent price action, while undeniably we have a bear trend line, drawn off the declining peaks seen in 2007 and it might have been expected that the shares would test £18.30 once more, positive momentum divergence seen in last November has begun an adjustment in sentiment. The re-test of the November lows at the start of this year produced good volume. However, significantly the low was not breached and it seems we could now have broken the run of lower highs and lower lows that characterises a bear trend and the consequential minor bottom formation suggests a break of the trend line and test of congestive resistance at £25.85. Longer term a move to £28.00, via £27.00, looks achievable if this first target is made.

BUY at £23.18 • Stop Loss £21.95 • Target £27.00

Premier Research (PRG:AIM)

This time last year things seems to be nicely in an up trend with the shares up over 100% in the preceding 12 months. Then the wheels seemed to come off the bus in late April (a move only forewarned by a volume spike). The subsequent decline has been viciously unrelenting and at the worst point saw the shares down to little more than a ninth of their best level. A clear bear trend channel developed and has seemingly culminated in spike low (with high volume confirming a final cathartic shake out has occurred). The bounce since mid December has taken the shares up to pressure both the bear channel upper resistance line and the 50-day average, which has previously remained tantalisingly out of reach. If recent activity is considered to be a mid-move flag, then further gains should be expected to test 115p, which might well then coincide with the declining 200-day average. Any move above this level would target congestion close to 145p.

BUY at 72p • Stop Loss 59p • Target 115p