A positive spin on Dignity shares

DIGNITY (LSE:DTY)

Having been asked about a company named after the famous Deacon Blue song, we took a hard look at their price potentials. In light of their principal activity, perhaps a miracle is due for Dignity (DTY) given the time of year. Then again, such miracles would probably prove bad for funeral companies.

The share price was recently stuffed six feet under, hitting a low of 735p which actually may not be too bad. We’d a calculation giving a bounce potential if the price hit 690p and, realistically, the drop level achieved is certainly in the ball park, perhaps even indicating some hidden strength.

The immediate situation is fairly simple.

If the price now betters 1,030p, there’s a pretty reasonable expectation of a rise toward 1,252p. While in itself this is a fairly useful hope, utterly key in such a resurrection shall be 1,252p being bettered.

As the chart shows, this lifts the price back above the prior up-trend, giving hope for future recovery to 1,568p and hopefully beyond.

That’s about the end of any positive spin.

When the market stuffed the price downward in January, it would be sensible to expect a bounce point. While we calculate 690p as possible, the share has simply messed around for a few months, neither rising nor falling with any real force.

Unfortunately, this creates the situation where weakness below 735p will doubtless hit 690p, but should the price close a session under the 690p level, we get to cough politely and mention a longer term “it must bounce” bottom at 246p.

The foregoing is a bit messy, but we tend to expect 690p to make an appearance once the current period of mourning is over. What happens next shall prove crucial.

Source: interactive investor                Past performance is not a guide to future performance

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

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