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Barclays a Brexit Bellwether

Barclay’s is one of the UK banks with the biggest Brexit exposures. Its chart is also at crucial point. Not only does that create trading possibilities; it also makes this chart a good indicator of wider market sentiment on Brexit.

Analysts believe that the loss of European “passport” rights will knock Barclay’s profits heavily. Passport rights allow banks in one member nation to offer services in all the other EU nations. The chances are Brexit will see UK based banks lose this right.

Barclays has a large exposure to investment banking. Brexit will force it to significantly increase operations and costs in Frankfurt or Dublin to keep trading European securities and to provide services to European corporates. These extra costs will also be a negative for its competitive position.

At its low on Friday, Brexit had wiped 35% off Barclay’s share price. It’s since recovered 14%

Barclay’s chart is also interestingly placed. Because it’s so much in the Brexit firing line, it will be an interesting chart to follow. It could be a litmus test for underlying market concern over Brexit.

If Barclay’s can rally convincingly off Monday’s low it will confirm a triangle pattern. Although it is 14% above the low, it’s still trading inside Monday’s big candle. That means the triangle scenario is by no means a certainty at this stage. Downward momentum on the weekly slow stochastic indicator still looks pretty powerful at this stage (see box below the chart). I want to see more upside to convince me that this knife has stopped falling; confirming the triangle.

However, if we do get a triangle, the text book calls for Barclays to recover to the resistance line around £250 before ultimately falling away to new lows. Given that the current stock price is £138 that implies plenty of volatility ahead! 


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