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If the markets appear weak then there is good cause to ‘go with the flow’ and this week look for three charts that are themselves signalling weakness. Undoubtedly there are stocks that will buck the general trend and when the turnaround comes there will be a time to start picking up oversold and bargain stock. However, if we are entering a period of sharply down trending markets, the likelihood is that regardless of individual circumstances there will doubtless be a general mark down and what appear to be cheap stocks will get even cheaper in the main. It could be a good idea, in common it seems with a fair few company directors, to beat the CGT change deadlines and book some profits.

Chloride (CHLD)

Having risen over ninefold since the lows of 23.5p in 2002, the company, that used to be known for car batteries and now makes swankier uninterruptible and secure power supplies (probably with batteries inside them), has been a star performer. However, as the chart seems to show, the up move in November could well prove to have been a final ‘blow off’ event and though the recent rally recovered the 50 and 200-day averages, this move was made on reducing volume and is itself now petering out shy of the long-term channel return line and previous resistance at 200p. A retest of the support line close to 155p seems likely and it raises the possibility of a potential head and shoulders formation which, if completed, would then target 94p, well below the channel support line which is currently rising through 125p.

SELL at 179p • Stop Loss 195p • Target 125p

FirstGroup (FGP)

Operating one in every five buses in the UK, FirstGroup also have a significant exposure to rail transport both here and in the US. Like Chloride, its shares have performed well since they based in April 2000 at 140p, however, the chart is not looking so positive now. A large double top pattern that formed over much of 2007, seems to have completed with the recent falls below 600p, not helped by the ‘dead’ cross made by the key moving averages last week. The target from this pattern measured from the peaks at 800p to the corresponding neckline level and applied to the downside break point suggests a move to 410p. This might seem fanciful at this point, however, bear in mind that the 61.8% retracement of the grand 2000 to 2007 bull run comes in at 398p and the long-run bull trend line drawn off the 2000 low and the correction low seen in early 2003 is rising toward the same level currently. Before such levels can be contemplated the price must test potential support from the 50% retracement level, which is closely aligned to the 1998 highs near to 480p.

SELL at 579p • Stop Loss 645p •Target 410p

ICAP (IAP)

Up from 36p in late 1999, the specialist inter-dealer broker’s shares have recently traded as high as 738p. Indeed, the shares climbed by some 60% in the second half of 2007, a move that was foretold by the breakout from the sideways trading range evident on the chart between 550p and 450p. However, of late the market has indicated that upside momentum is on the wane as divergence in late 2007 when the highs were being reached has developed into a bearish trend on the RSI indicator. Last week’s decline is suggesting a possible double top is completing and if so it would target declines back toward a test of the old 450p support level. This would take the share price down through the 200-day average at 575p and the bull channel base line currently at 530p, both of which might reasonably be expected to support. If the latter were to be breached then the longer term bull trend will have been terminated and there will be risk of further weakness toward 325p, which marks the channel extension level and coincides with significant congestive support (previously resistance in 2004 and 2005).

SELL at 631p • Stop Loss 688p • Target 450p