UK Small Cap Technical Outlook – LON: AVON, LON: GKP

Avon Rubber (AVON): Intermediate Rally To 870p Expected

Avon Rubber is an interesting play, as it has been mentioned on TipTV several times in the recent past, as a stock which may be one with potential. This was said both on a technical and fundamental basis. Alas, the early 2016 volatility on the stock market rather spoiled the bull scenario, with Avon Rubber shares suffering the “baby thrown out with the bath water” syndrome. This took the stock back down to the 700p zone for February on a brief basis, noticeably marginally higher than the former 2015 floor at 687p intraday.

All of this suggests that we should go with the idea of at least an intermediate recovery here, especially given the way that it is possible to draw a multi tested uptrend line in the RSI window from as long ago as the end of January, well before the shares bottomed out. Also helpful is the way that the RSI now at 57 has pushed back above neutral 50 for the first time since early December, a decent leading indicator on further upside.

The message now is therefore that at least while there is no end of day close back below the 10 day moving average at 764p we could be treated to at least a decent intermediate rebound. The favoured destination at this point is the November resistance line projection at 870p, a target which could be hit as soon as the next 4-6 weeks given the latest pace of recovery here so far.

Gulf Keystone (GKP): Outside Chance Of A Dead Cat Bounce

Given the way that even the greatest fan of Gulf Keystone would admit that this is company where practically everything that could go wrong has gone wrong, to see the shares still with us is something of a result. Nevertheless, it is difficult to pretend that the position here is not precarious, and that at any time the worst could happen.

But at least from a technical perspective one can say we are looking at a situation where there is an outside chance of an intermediate recovery – IF – we see a continued reaction off an August support line currently running at 6p. The implication is that provided there is no end of day close back below this number there may be a test of former 10p zone support from January on a 1 month timefame – as much as on the basis that the RSI at 24 is in the oversold zone as anything else.

The best case scenario on offer at the moment would appear to be a move to the area of the September resistance line projection / 50 day moving average at 13.46p, but it has to be admitted, this does feel as though it is a long way away.

Otherwise, below 6p on a weekly close basis and one would be fearful that the slow death experience here continues as it has done for the past 2-3 years.