With such interesting stats, we thought it would be a good idea to check out its price action to see if we could identify trading opportunities. Our findings are presented below.
Range bound – ₦11.20 to ₦5.00
Our first observation on the price activity of ACCESS Bank is that it has been trading in some sort of range between ₦5.20 and ₦11.20 (with some minor exceptions), since 2011.
At the top end of the range, there is a resistance zone between ₦11.20 and ₦10.20. At the bottom end of the zone, there seems to be a support zone between ₦4.00 and ₦5.20. This may not seem like the clearest of ranges but there have been enough tests, and rebounds (green and blue circles), in those areas that make it significant enough to opine that they are valid ranges.
An Even Bigger Picture – Convergence
Zooming further out to a monthly chart, we discovered that the recent price action (from the 2016 low around ₦3.50) has shaped into what is popularly known as a symmetrical triangle chart pattern in technical analysis.
Investopedia defines symmetrical triangles as chart patterns characterized by two converging trend lines connecting a series of sequential peaks and troughs. These trend lines should be converging at a roughly equal slope. As price approaches the apex of the triangle, it will either:
- breach the upper trendline for a breakout and uptrend on rising prices, or
- breach the lower trendline, forming a breakdown and downtrend with falling prices.
How to trade ACCESS Bank (Opinion Only!)
To develop a trading plan, we need to reiterate what the big picture is. In this case, ACCESS’s big picture story is a long-term, and range-bound price action. The not-so-big picture is the symmetrical triangle that has formed within that trading range.
Taking these into consideration, as well as the recent headlines, the probable options for ACCESS Bank’s price action are:
- Break-out of the upper range of the triangle – The most likely price level or a breakout would be somewhere around the ₦9.50 price level. If this happens, there is a ₦1.70 potential upside before price encounters the major resistance zone between ₦11.20 and ₦10.20. With a 1:1 or 1:2 risk to reward ratio, this does not seem to be an appropriate risk to take. It may be best to wait for a test of the resistance zone.
- Range in the triangle – In the event that sentiment does not change, we may see the stock trade down and test the lower support level around ₦7.00. That, if confirmed with good volumes, should hold up and provide some buying opportunities to the top of the triangle. This could provide a risk to reward ratio of, at least, 1:4 – a better proposition than scenario 1.
- Break below the triangle low – In the quite unlikely scenario that this happens, you could expect support at ₦5.00 with an even better risk to reward opportunity, unless news filters that ACCESS made some poor decisions in its recent news-making events.
In the three weeks since this post was put up, scenario 1, above, has played out. Access Bank stocks have traded up to, and through, the ₦9.50 price level. This appears, so far, to be a false breakout because the stock broke just above the resistance level at ₦9.50 and and traded up, to ₦9.95.
The price pulled back sharply after touching ₦9.95, dropping all the way down to ₦9.00 in the week after the rise (a 9.5% decline). The stock looks to be headed up, again, and we could see another bounce off the resistance zone between ₦10.20 and ₦11.20, unless some major news breaks.
Till we get another update, this is to profitable investing!