Is this trend a good trading opportunity?

Will Melrose Industries turn, or will it continue falling to November 2016 lows?

• The chart shows the Melrose price action since late August.
• Shares in a 5-week downtrend from August highs; now at 177p.
• Negative momentum since Melrose Industries announced a pre-tax loss (6 Sept) related to hostile takeover GKN.
• Analysts at A.J. Bell note investor concern over the deal, saying that Melrose may have “bitten off more than it could chew”.
• Shares now trading at 2-year lows; -27% from 2018 highs; -17.25% year-to-date
• Shares fell 12% in the past week. Will this negative momentum continue?

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Trading Melrose Industries – An Example

Let’s say the trend appeals to you, you think it’s likely to continue. You decide to sell exposure to £10,000 worth of Melrose Industries using a CFD, at the current price of 177p. To do this, you need £2,000.

Let’s assume the Melrose Industries trend continues to November 2016 low of 162p (-8.4%). Your profit would be £840, from your initial investment of £2,000.

Conversely, let’s assume you open the above position, and place a stop-loss at 5% from the current price. Melrose Industries shares rise 5% and hit your stop-loss. Your loss would be £500.

This is provided for information purposes only. It should not be taken as a recommendation.