While financials as a group didn’t fare too badly to start the week, Barclays PLC (NYSE:BCS) — the London-based financial services giant — fell by a little more than 5%.
Much of the selloff was attributed to the sale of Barclays warrants by Qatar Holding to Goldman Sachs (NYSE:GS) and Deutsche Bank (NYSE:DB), who in turn sold more than 300 million Barclays shares to investors. While Qatar Holding reiterated its strategic support for the bank, on the charts, the stock left a few ominous signs that at least some further weakness might be ahead; little changed Tuesday, when the stock finished flat.
(Note: The below charts are of Barclays’ primary stock listing on the London Stock Exchange, but the company’s ADR trades on the NYSE under the ticker symbol of BCS, and levels mentioned below will be of the ADR.)
The weekly chart of BCS shows a clear line that has served as a toggle over the past four years. The level is roughly around the $16.50 mark and served as support from 2009 through the middle of 2011, but has offered good resistance ever since.
Monday’s gap-down came right near the $16.50 line and was further signified by the heavy volume, which was a direct result of the stock sale. Price action being what it is, though, I take notice when I see such patterns.
When I look at the momentum oscillators such as the Relative Strength Index, I note the negative divergence it has displayed since mid-September, which means the stock had been climbing on an empty tank as of late.
The importance of the $16.50 area should not be understated. While the stock eventually will try another shot at overcoming that level, in the near-term, I think a potential downside target around the late September lows at $13.65 is reasonable.
Should the stock run back up, my stop level is at last Friday’s highs at $16.30.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.