Following trends really should be at the core of the approach of all chart-based investors and during all kinds of market conditions there are decent trends to be had. But trends do not go on forever and this week we focus on a couple of shares that have had a pretty poor 12 months but a more positive 2016 so far. Could we be at the beginning of a turnaround in two iconic British brands?

Rolls Royce (RR.)

Buy 660p Target 850p Stop Loss 580p

FTSE 100 engineering business Rolls Royce (not to be confused with the manufacturer of posh motors which is an entirely different business) is emerging from a rough couple of years. A series of profit warnings has seen the share price halve, and more. But a new management team came in last year and so far at least the progress this year has been more positive.

The share price is up by around 30% from this year?s lows - that is an impressive bounce and brings it onto our ?turnaround? radar. But it also presents another problem as the ideal place for a stop loss for this idea would be below those 500p lows, which is a little too far away. A tighter stop loss will be used, assuming the share price has more momentum to come. As long as that 500p level remains intact Rolls Royce remains a buy on weakness. It is likely to be some time before Rolls threatens those historical highs at £13.00 but maybe the shake up last year and this year?s resulting strength are the first steps to a longer-term recovery.

Rolls Royce April 2016

Burberry (BRBY)

Buy £12.70 Target £16.50 Stop Loss £10.80

There was a time when this fashion company could do no wrong and it became a firm favourite with Chinese buyers snapping up the famous checked raincoats. The slowdown in these Asian markets has taken its toll on the Burberry share price. In early 2015 it was at an all-time high just above £19.00 but had slid to below £11.00 at the beginning of 2016. A lesson to us all to take at least some profits now and again.

The trend over the past year has been quite well-defined meaning this year?s break through that falling resistance has been a clear one. We even have the early beginnings of a new trend since the January lows, which makes it an interesting company for inclusion. As with Rolls Royce, the ideal place for the stop loss is the other side of the absolute low for the downtrend, but once again this is a little bit too far. We will use the £11.00 level as our reference point as it did provide good support though January and February.

Burberry April2016

Disclaimer: This is an example of material that appears in SHARES magazine and does not constitute investment advice

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Issue Date: 20 Apr 2016