DGE

The past three years have been good to shareholders in FTSE 100 drinks company Diageo, with shares climbing steadily to chalk up a more than 50% increase since 2004. Progress this year has been less striking but so far Diageo has performed well, with the recent weakness leaving an interesting set up on the charts.

‘No market moves in a straight line. Technical traders and investors will often look at short-term weakness in a longer term trend as a buying opportunity,’ says David Jones, chief market analyst at CMC Markets. ‘Whether this proves to be the case for Diageo remains to be established but the share price has been in a clear uptrend for at least three years. Back in April, the £10.20 area stopped that bounce of short-term weakness and traders are going to be watching to see if that is going to happen again.’ To limit risk, it’s sensible to place a stop loss below the £10.20 support level.

ACTION: BUY Diageo • Target £11.60 • Stop Loss £10.10

TIME TARGET: 3 WEEKS