What Micro Focus needs for a miracle recovery

Written 19th March 23:49

Micro Focus International (LSE:MCRO)

Every now and then, red flags come from the most unlikely sources. This lot, Micro Focus International (MCRO) with the acronym MFI, set themselves up for calamity fairly early, if the defunct junk furniture behemoth was anything to go by.

One of the more irritating aspects of trend lines is they allow people to look wise after the event.

However, once the share price broke through the red line on the chart earlier this year, alarm bells should have rung.

In fact, if we’re picky, alarm bells starting ringing on January 8th as the manipulated movement indicated the market was really not happy about something.

This particular movement calculated with a logical bottom of 2,080p, along with the implication any future moves below such a point risked calamity.

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On February 20th, the price broke 2,080p, along with our red trend line. From this point on, it became a matter of “lower lows” and news flow as the next drop target level was at 1,275p.

The price celebrated 19th March by being gapped down, opening the session at 12 quid, below a target level, and now residing in a region where the next calculation sounds too silly for words. Or even numbers.

We are calculating absolute bottom on the current cycle at 90p. We cannot calculate below such a point.

The price requires a miracle regain of red – currently 1,470p – before any rise can be taken seriously. About the only early warning of such a Lazarus effect will be if the share price somehow makes it above 1,275p anytime soon.

If we’re polite, we would suggest weakness now below 782p signals a trip to 90p. If opting to be blunt, the price is now trading in a zone with 90p as “bottom”. Easter is soon, perhaps a miracle shall occur!

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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