Shares digital

While the FTSE 250 was the star performer for much of the 2003-2007 bull market, more recently there has been something of a redressing of the balance as constituents of the second-tier index have suffered proportionately more than those of the FTSE 100 as the market in general falls.

On an individual basis, many of them continue to exhibit charts that suggest further declines are more than likely. Nevertheless, within their ranks are a few candidates that appear to warrant consideration for buyers. In two of the cases I examine this week there has already been significant blood-letting that has perhaps been overdone, while in the other is a clear case of a share shrugging off market sentiment and showing strength against a grey backdrop.

Bradford & Bingley (BB.)

If you need proof that the market has a memory then you only need look at the chart of Bradford & Bingley. Of course it has been suffering collateral damage from the Northern Rock debacle, with a drop in value over the past six months of more than 45%. However, this has taken the shares down to the key 243p support level, which has marked the lows for the shares and terminated all previous declines. Combine this with the protracted bullish momentum divergence and, while the shares are unlikely to climb as fast as they have declined, it might well be that they are basing near to this level and a recovery in due course will focus on the other major level evidenced on the chart, that of resistance near 355p. Perhaps one to tuck away.

BUY at 240p • Stop Loss 228p • Target 355p

Ladbrokes (LAD)

The gambler’s shares have suffered a sharp selloff recently. The top pattern that formed over 2006 and most of 2007, and which can be seen to have formed a triple-top shape, targeted a 90p move. On the break of 370p in mid-November, the pattern completed and pointed to a test of 260p, near the 61.8% retracement level of the 2003-2007 upmove that came in at 265p. This target was subsequently satisfied by the low of 254p, seen on 25 January. With bullish momentum divergence and buying interest evidenced by rises following increased volume, it could be that we are now in the process of making an inverse head-and-shoulders pattern, though the 50-day average seems to be proving resistive, and weakness toward 254p could yet reappear, looking out for a bounce to test resistance from previous lows at 370p seems achievable.

BUY at 290p • Stop Loss 253p • Target 370p

Inmarsat (ISAT)

When a stock shrugs off the general market trend then it is clearly showing inherent strength and should be seriously considered. I have been watching the satellite company’s shares for some while. The upward-sloping wedge pattern that formed over the 17 months to October 2007 predicted a 107p move, though until the upside breakout occurred I could not pencil in the actual target. When the shares moved through resistance from the wedge at 439p I was alerted to expect gains to 562p. In the event, so far we have seen a high of 544p at the turn of the year. Though there has been a subsequent retest of support from the wedge upper line (previous resistance), the market remains strong in the stock, reviving expectations for a test of 562p and perhaps more. Ride the trend.

BUY at 515p • Stop Loss 496p • Target 562p