Share tips for a falling market

Despite the FTSE All-Share index suffering a near 17% fall, there are still individual stocks showing bullish characteristics, writes Graeme Dickson who tips some shares to buy and others to sell.

Given the near 17% fall in the FTSE All-Share index, I am mindful not to give overly bearish ideas after the ‘horse has bolted’. Nonetheless there are still individual cases where certain sectors and/or stocks appear to be showing concerning characteristics, some of which I will highlight below.

In all cases the charts show a pink line representing the eight day moving average and the turquoise line as the 20 day moving average. The whitish/grey line stands for the 200 week exponential moving average (EMA).

The first idea is in fact a bullish one and was borne from the fact that the electricity sector looks to have turned the corner, having broken a down-trend that started in February this year. In fact Scottish & Southern Energy (SSE) was suggested as a sell idea back on 31 March at 1106.5p before hitting the desired 1040p target six weeks later. The stock was almost at 1000p at one stage before it reversed and closed yesterday at 1118p. Perhaps the shares have risen a bit too much, too quickly, so the timing isn’t perfect, but the bull argument is now in favour of both sector and stock so it should theoretically perform relatively well over the coming weeks/months.

Watch out for resistances at 1180p (the 200 week EMA), 1200p and 1250p: a break through the higher target could ultimately lead to a test of 1400p which it hasn’t achieved for almost two years. Support should kick-in at 1080p, 1040p and 1000p.

The next idea is a bearish one in the form of Ultra Electronics (ULE):

The stock has performed extraordinarily well in the last 12 months, but the sector is taking a pounding and it appears as if Ultra Electronics is starting to catch up with its peers. Support should come in at 1500p and through here 1400p. A break through 1400p might lead to a test of the strong support level of 1270-80p and possibly the 200 week EMA of 1200p. Resistance should be found at 1655p on a close of day basis.

Finally keep an eye on WH Smith (SMWH).

The stock was tipped as a sell on 8 January at 493p and regrettably after the stock had fallen I suggested a trailing stop, which would have been triggered around the 469-470p region. The stock did actually test 520p a few weeks later but since then the shares have languished and yesterday closed at 401p and more importantly below the 200 week EMA of 417.5p. I cannot help but think the shares are sinking to new 2010 lows given what is happening to the rest of the sector. Resistance should be found at 417-420p and 445p, but ultimately the trend is your friend and that is currently down. Look out for support at 365p, 320p and 300p.