Shares in engineer Babcock International (BAB) are down in the dumps this morning, footing the blue-chip UK 100 index on a combination of analyst downgrade (Deutsche Bank; Hold from Buy) and charting technicals. The shares had already peaked on Friday, at the ceiling of a 3-month falling channel that coincides with a 100-day moving average hurdle. Today’s Deutsche reappraisal has only made matters worse for the shares, extending Friday’s sell-off to test their lows of mid-December and trade levels last seen in early July when the post-referendum Brexit bounce was just getting going.

Several others technical indicators also merit attention, including a bearish cross by directional indicators, a reversal on the Point & Figure chart and Stochastics correcting from overbought highs to break below neutral and waning trading volumes since end-Nov. These all suggest that if 900p gives way there is potential for further downside to the floor of the aforementioned down channel around 840p. If the trend is supposed to be your friend, this one isn’t playing matey with the bulls. A dividend yield below that of the index doesn’t help either when income is a major focus in an environment of low returns.

One silver lining of the sell-off is shallow falling support thanks to a trendline that can be drawn under the lows of mid-December, late November, early August and back through to mid-June. 900p has already help up this morning and could yet provide a base for a rebound, even if only to the 950p channel ceiling from whence they fell Friday.

Mike van Dulken, Head of Research, 9 Jan