Clearer skies for BA?

INVESTORS will be taking a close look at BA's latest traffic figures. The question now is, with the share price having fallen by more than one-third, are shares poised for a boost, or will there be another forced landing? Technical analysis* has some answers.

Looking back at the chart, BA has traded to technical perfection. In February shares were trading at 340p, but descended within a 'bear channel' pattern to an August closing low of 205p.

Interestingly, this was also the low closing price just 10 days ago. On each occasion shares found new support from buyers, boosting the price by a few pence. This double dip to the horizontal 205p level now provides support for the stock. So what next?

Still in the downward 'bear channel', as shares move lower they'll meet the horizontal support line at 205p. Just as it looks on the chart, as the down-line meets the horizontal line, it combines to form a downward sloping 'wedge' pattern.

What does this mean for investors? Technical analysts will look for a penetration for either trend line to signal the direction of the next major move.

Quite simply, if shares break and close beneath 205p, then in all likelihood the bear channel will continue to pressure shares even lower and the next stop will be 185p.

But a break and close above 235p will signal the end of the bear channel. This major trend reversal should then propel BA straight to 255p, then 276p, and with a good tail-wind, back to the psychological 300p.

Stockwatch is written by William Akerman of Quantigma. For more views on techical analysis, go to www.quantigma.com.