Shares digital

I am reminded of the old adage: ‘the night is always darkest just before the dawn’. We are in a maelstrom of dire predictions and given our often trumpeted ‘strong’ economy has been largely based on debt-fuelled retail spending, the earnings of the City and property price inflation, it seems likely we are to feel the cold wind of reality.

Verbal bravado from the prime minister or chancellor won’t gloss over the facts, and the economy looks anything but robust.

However, the market is wonderful for correcting and discounting changing outlooks. Several sectors have already adjusted to compensate for expected tough trading conditions and in some cases it might be said the blood-letting has been overdone.

This does offer up the opportunity for fortune to favour the brave. Given the black clouds hanging above anything associated with real estate at present, it might be supposed that this would be the last sector to consider investing in. However, from a charting perspective at least, it seems the market could just be signalling that a dawn is about to break.

Barratt Developments (BDEV)

This column highlighted the house builder in late December`, when the shares stood at 478p and it appeared they were forming a base. But they dropped through support at 433p and took out my stop at 430p to test a low of 315p on 10 January. On the bright side, this has if anything confirmed the shares were quite near their base, and it now seems a spike low has formed, characterised by the sharp downmove, raised volume at its climax and equally sharp reversal in price action, and generated positive momentum divergence. So positive an upmove has occurred that we have a gapped upside breakout and an early test of the old support level at 433p, coincident with the falling 50-day average, looks inevitable. While the share price might well pause for breath near this level, look for the market to push the shares higher over the coming months.

BUY at 392p • Stop Loss 360p Target 813p

Raven Russia (RUS:AIM)

This investor in Russian freehold and leasehold property seems to offer exposure to an economic boom based on its massive intrinsic wealth in much-needed commodities. The shares have been volatile over the past year, not helped by chilling relations between Russia and the West. However, the chart shows that although the price has dropped by over 32% since last spring, bottoming late last year at 85p, two subsequent tests of support failed to attack this low and indeed mild positive momentum divergence can be seen between the lows of last August and December. Most interesting is the increase in volume seen last week, which suggests renewed buying interest. Though the 50-day average capped the upside pop at the turn of the year, with the afore-mentioned support close by, a buy trade could offer the right reward-to-risk profile.

BUY at 89p • Stop Loss 84p • Target 109p

Savills (SVS)

The shares of this purveyor of upmarket property services have suffered since peaking at 712p last May, just shy of their 2006 all-time high of 739p. Given they traded at 21p in late 1995 that was a great compound growth rate and perhaps puts the past eight months into context. But the shares have lost over 60% of their value in a relatively short time and, though they have an exposure to a slowing property market, it could be argued that many of the properties they sell are the province of those for whom economic cycles are irrelevant. The share price has tested support from the old resistance level defined by the 2004 high of 244p and incidentally closed the upside breakout gap that opened up at the end of that year. Momentum lows have been rising against the falling price troughs, creating bullish divergence and the break of both the 50-day average and the bear trendline is all positive. Look for further gains to focus on a test of resistance from the falling 200-day average, currently close to 470p.

BUY at 301p • Stop Loss 272p • Target 420p