AIB share at the break out point

Chartists will be getting excited about the recent action in the AIB share price. The “Moving Averages” in which they place some faith as indicators, are converging…both the 50 day average price (“MA50”) and the 200 day average–MA200. The (green line) share price broke upwards through the (red) MA50 in April and has been flirting with the (blue) MA200

A sustained break upwards–say, with no more than a couple of small dips back and then a surge forward- would indicate plain sailing up to perhaps double the present price. This action would be greatly reinforced if and when the MA50 itself breaks up through the MA200. This would bring in some heavy investors, who basically have been missing in the last 6 months or so. The investment fund managers sold out some months ago when the panic started- indeed they contributed to it- leaving the field to small buyers, and “bottom fishers”, whose ownership of shares in the company has now risen to c. 50%. These will receive a well deserved reward of some profit- or a partial return to previous much higher values- when the big boys come back in.

The second image here shows the collapse in the share price over the last year, from a September high of almost US$30 to a low in March of c. $0.70 cents. (This is the New York quote for the ADR, worth two ordinary shares, and which keeps parity on a daily basis with the Dublin price). You can see that the price broke upwards through the MA50 in May and later found resistance at the MA200, and has since been in a squeeze between these two converging trend lines. In the last couple of days it dipped back below the MA50 for a day or so and today has come back up to challenge the MA200 again. Look out for some high volume buying action if it breaks through and stays over the MA200 for a few days.

aib-1yr-to-1407

But what about the fundamentals?
Well…it depends on whether you believe, or not, the academic economists and financial professors, who called for nationalisation. That has been a big threat overhanging the company. But I believe there is little or no possibility of that…It simply isn’t in the national interest, nor the narrower interest of the Irish Exchequer, nor the shareholders interest, nor the best interest of Irish pension funds, nor medium term economic /industrial policy. The vision of our professional economic commentators – most of whom couldn’t see a property bubble bursting in their faces- has been dim, to a worrying extent.

Three main factors will rescue the main Irish banks…the fact that they haven’t invested in completely worthless derivatives, unlike their UK colleagues…the fact that they have long term, substantial retail and business deposit networks,….and the NAMA, a brilliant solution to our economic (and cash-flow) difficulties. I’ll write more about this later

The main threat now to our national economic security is a foreign takeover of our main banks, given their current ridiculously low valuations. (Maybe that’s the secret agenda of some of the nay-sayers?)

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