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GKP daily 12/07/13

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Friday saw a perfect test of the price downtrend from the 260p high but the SP remained bullish and closed such that there was also an RSI trendline breakout. This is significant because that RSI trendline is the one from the 450p high so I remain bullish here despite Friday's and Saturday's disappointing events with M&G.

That's not to say that an RSI breakout results only in upward price movement. Look at the lower RSI trendline on the attached chart. The RSI breakout occurred a day before the big price move but the higher low at 129.25p came on a perfect backtest of that RSI trendline so at some point I'd expect a similar backtest of the latest RSI trendline during a retrace.

Of course, there's also the possibility that this could be a false RSI breakout - we need price to follow through in the next day or two.

In the short term there's a possibility of a retrace to c. 165p - the 38.2% Fib of the rise from 140.5p on 3rd July - so I'll stay bullish as long as that holds. There was plenty of consolidation just below the 166p breakout so it should hold but downside alarm bells will start ringing for me if it doesn't so I may move my stops up to just below that, or the 155p, level if the morning trading looks too bearish. In fact, price shouldn't really go below the 158p mark during this current move (I still think, even if bullish, that it'll come back to the mid 150s level later on) as that was the top of what looks like a wave 1 up.
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