FTSE 100 Stocks – Outlook for LON: SHP, LON: TSCO

Shire (SHP): Exhaustion Gap Targets 4,600p Zone Again

Although shares of Shire are very much a blue chip FTSE 100 fixture, as far as the price action of the stock in recent times it could be said that those involved here have experienced the kind of rocky ride normally associated with small cap biotechs. This point is underlined by the volatile decline within a falling trend channel on the daily chart, one which has guided the stock down from 5,500p plus to 3,500p last month.

The good news for the near term though, is the way that there has been a higher low put in place above 3,500p. There is an added charting buy signal in the form of an exhaustion gap reversal of the mid March gap to the downside. The top of the gap is at 3,753p, with the implication being that while there is no end of day close back below this level one would be looking to further significant gains.

The favoured initial target over the next week is the former February resistance at 3,980p. Above this on an end of day close basis could unleash a sharper move higher towards the area of the 200 day moving average at 4,618p / December resistance. The timeframe on the 200 day line target is as soon as the next 1-2 months.

Tesco (TSCO): Above 200p Could Lead To 250p

It would appear that Tesco in the recent past has been a good example of the divergence which can occur between technicals and fundamentals, and how to focus on either one or the other in order to get on the right side of this major retail sector play. For instance, over the course of the last three months we have traded in the aftermath of a December – January double bottom bear trap gap reversal from below 140p. This has left a couple of unfilled gaps below the 155p level, something which on the face of it is a very strong backbone for the latest recovery. On this basis one would expect to see further significant gains, especially given the way that for the bulk of March to date we have seen this stock hold well above the 200 day moving average now at 184p.

The idea now is that as little as an end of day close back above the latest swing high of 198p could unleash a move as high as 250p over the next 2-3 months. This target zone is derived from a resistance line projection which can be drawn from as long ago as August last year.

Also helping back the idea that this turnaround is here to stay is the way that one can draw a multi tested uptrend line in the RSI window from as long ago as the middle of January.

The line in question runs at the 55 / 100 level, suggesting that at least while this holds there is little reason for bulls of this stock to blink in terms of the buy bets they are holding.