ASOS (LON:ASC) is often cited as one of the AIM’s success stories.
Given the drubbing the AIM is prone to meting out to its constituents, I’ve opted this week to look for danger signals against ASOS. After all, it once traded above 70 quid and is now languishing at around 30.
One number to give up front is £36. If this share trades above such a point (represented by blue on the chart) all my drop calculations become mush.
Firstly, I’m concerned with the circled area on the chart from last year.
For some reason, the market saw fit to gap the price down from £48.
This movement was quite telling as it forced the share below its uptrend since 2011, rather effectively suggesting its glory days were over.
The highest the price has achieved since is £42.50, so the gap has not been covered. This gives slight hope for the future but I’m not terribly confident.
Secondly, there’s the matter of the long term red uptrend. Exquisite care was taken to ensure the price did not recover above this trend, resulting in the situation where I’m not confident I’ve seen a bottom.
Despite the share stuttering around the 30 quid mark currently, I’m tending to expect a visit to £27.15 sometime soon. Hopefully it bounces and challenges my blue line, ‘cos if it doesn’t, my next expectation with closure below £27 is a trip to £22.
As the chart shows, pretty close to the £22 level is a long term uptrend, created since the price was manipulated below the ruling trend. Commonsense suggests it almost must bounce as the 22 quid level meets this uptrend before the end of this year.
But there’s another fly in the ointment. If we’re witnessing a campaign to cover historical manipulation gaps, there’s one at £19, which ideally the market will ignore. The implication of closure below the dashed red line will be of a share getting ready to join some of the AIM’s historical greats in the valley of shattered dreams.
A break of this trend allows an initial £17 with a secondary a very probable £5.20
Enough of the doom and gloom. I’ve managed to write myself into feeling miserable and, as always, there’s a potential bright side. All I need do is look for a signal suggesting it will better the blue line and £36.
At time of writing the share is trading at £29.25 and needs exceed £31.60 to signal growth to an initial £32.75p. In itself, this is a pretty useless movement. But the secondary should such a level be bettered is £36.20. This creates a whole new ball game as it commences a cycle towards 50 quid!
Now I’m happy again.
Alistair is the founder of www.trendsandtargets.com