Barclays share price sank 3.70% to its lowest level in seven months yesterday as covid fears rocked global markets. Here’s why BARC may crash another 18%.
It was a bad day at the office for Barclays PLC (LON: BARC). Shares in the UK-listed banking giant slumped 6.10p, ending the day at 159.32p.
Barclays has lost more than 17% from the May 190.20p high and is now just 9.39% higher, year to date.
The recent negativity sweeping markets is due to the rise in Covid-19 infections, attributed to the delta variant strain of the virus. However, infection rates are not the only thing surging.
On Thursday, Treasury Secretary Janet Yellen spooked the market, reminding investors that rising consumer prices could be here for some time. Furthermore, the former Fed chair predicts ‘several more months of rapid inflation’ before it eases into the end of the year.
Finally, the UK banking sector is reacting to earnings across the pond. Crucially, US banks second-quarter earnings have highlighted the threat posed by the nascent fintech market.
Costs at the premier US banks have risen 10% over the last quarter. The $6.6 billion jump comes as traditional finance houses step up spending in a bid to thwart both talent and customers migrating to fintech rivals.
The subsequent sell-off forced Barclays share price to a critical long term level of support yesterday. And although the market did manage a modest recovery into the close, further price weakness could lead to a downside acceleration.
The daily price chart shows BARC ended the day just above the 200-day moving average at 156.10p. Considering the average lines up with two multi-month highs from December around 157.00p, it’s essential BARC sustains this level.
Furthermore, the 50 DMA at 176.97p has crossed below the 100 at 178.40. This reinforces the souring sentiment and lends weight to the bearish outlook.
Should the price close below 156.10p, the bears will target the 28th of January low at 129.28p, around 18% below the current level.
This bearish scenario is dependent on the price losing the support of the 200 DMA. Therefore, if BARC stays above 175.10p, it may recover. Moreover, if the share price climbs above 178.40p, the outlook turns positive.
Although, considering the current backdrop, the leg lower looks more likely.
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