Is now the time to buy RBS shares?

Royal Bank of Scotland (LSE:RBS)

For some reason, we always find ourselves delaying any commentary against Royal Bank of Scotland (RBS). Unfortunately, the reason for this is a “what’s the point” mindset as the sodding share rarely does anything useful. Or does it?

Two charts are required to explain our reason for slight – very slight – optimism. Chart #1 is perhaps useless, but essential to expand upon a theory.

We no longer expect price manipulation gaps to be covered by movement following the manipulation. We do, however, regard the period following a big gap as commencing a new trend. This is shown by blue on both charts, highlighting in Chart #2 RBS share price is now trading beyond a 10-year downtrend – since May 2008.

Of course, breaking a trend is absolutely no guarantee a price shall actually go up. It’s similar to Argyll’s weather, where seeing the first bumblebee of summer provides no certainty we shall not be waist deep in snow next week. [we are based in Scotland]

But in the case of RBS, when we zoom out and review the big picture calculations, it appears we should regard the price as being on a path to 312p next. Secondary, if bettered, is a pretty comfortable looking 360p.

Remembering we are looking at RBS, there is of course a fly in the ointment. We’ve shown it as red on Chart #2. If red is indeed the correct trend, apparently anything now below 260 should generate travel down to 244p. Secondary, if broken, calculates at 229p where a real bounce can be hoped for.

The foregoing rather neatly summarises our attitude to the share. Yes, it is probably going up and the big picture agrees. But first, we should not be aghast if it wastes everyones time by going down first.

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

Alistair owns shares in Royal Bank of Scotland.

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.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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