Technical Tuesday: Diageo Plc.

Monthly

Price reached an apex in 2013 and has since been in a consolidatory range ever since with resistance levels just above £21 where its currently retesting previous highs. The support lies just underneath £17 and found strong rallies on numerous occasions.

Given that the company has operations in a large number of different countries it exposes it to currency fluctuations and taking into consideration that it's listed on the London Stock Exchange meaning it reports in Great British Pounds, a surge in price has emerged following a dramatic weakening of the currency to all other major currency.

The 50 simple moving average(Yellow Line) is supporting the uptrend with the 200 SMA(Blue Line) a measurable distance away allowing the bulls open season on producing new highs provided they can break through resistance.

Observing the Relative Strength Index(more commonly known as RSI) we see that the indicator has driven across in a directionless motion which is evident in price action over the last three years. The areas highlighted in red are significant levels that have or could determine the speed of the trend.

In the smaller area, the indicator tracked above 80 and if you were to follow the price movement whilst in that zone you'd notice a solid momentum spurt taking place. Proceeding to the larger area we see the indicator becoming restricted, disrupting momentum from taking place however judging the strength of the previous monthly candle, its opened up the possibility of see the indicator rise above the 80 level.

If it were to do that then we'd see the consolidatory pattern broken and fresh highs being registered.  

Weekly

On the weekly we can identify two consolidatory price movements that have occurred, one that defines the longer term price movement marked with green lines, the second that's taken place inside the first highlighted with black lines. This suggests high degrees of frustration for investors and traders who ideally like to see prices go higher. 

The smaller consolidation pattern broke through its resistance of £20 and subsequently touched the longer term resistance of just above £21. It's difficult to say whether price will continue moving upwards as the sudden move has led the Stochastic to show overbought at a crucial point. 

We'd need to see the level of £21 and higher being broken, held and close high to be certain of an impending rally into new territory.  

Again the RSI is bumping up against significant resistance with a break to an upside to be considered as bullish in the medium term. 

Political bamboozling is leaving the market confused

As the fallout over Brexit continues the British Pound fell to its lowest rate in over 31 years highlighting the extent of fear lurking in world markets at present. Politicians have come out in their droves after a weekend of crisis talks in an attempt to pour cold water on speculation that the UK leaving the EU would cause shockwaves for years to come while others warned the stability of the British economy has been compromised because of the vote.

Chancellor of Exchequer George Osborne failed to convince market participants of certainty going forward stressing the point that the "new"government to be announced after the Conservative Party conference will need to find ways of protecting the fiscal shape of the UK's budget policy.

There were also rumours afloat that Osborne was considering his political position at this current time knowing fully well that his administration of government's crucial ministry's affords him a large degree of political credibility should he wish to pursue the position of prime minister, something his remained tight lipped about.

Yet the political infighting isn't immune to the Tories only with the Labour Party using the event as an attempt to oust recently installed leader Jeremy Corbyn who's been in the firing line from members of his own party for not being vocal enough in his campaign for the "Remain" camp. A number of Labour MP's have resigned their position in an effort to shore up support against Corbyn.

One would've thought the Labour Party would've use the vulnerability of the Conservative's as a platform to work towards in eroding the strength of the ruling party however top leadership has left a lot to be desired.    

British Pound drops below $1.32, lowest levels vs Dollar since 1985. pic.twitter.com/oxrCoZo1CT

— Holger Zschaepitz (@Schuldensuehner) June 27, 2016

The fate of Bank of England governor Mark Carney now hangs in the balance as critics have taken a swing at his ability to manage the financial system by saying his commentary during the build up of the referendum was largely skewed in favour of "Remain"putting him at odds with situation that's turn itself on its head.

A campaign to rid the Bank of its governor is placing additional risk into the equation making it difficult for any market participant to find any type of optimism in the midst of chaos.

And who can forget the frontrunner to become the next prime minister of Britain Boris Johnson who's been singing like a canary bird in his response to questions about the manner in which he envisions the process of Brexit unfolding in the coming years as well as the type of policy needed to make the market feel certain of a stronger Britain again.

When asked about his concern about the current market volatility over the saga Johnson shrugged off any concern saying he felt the markets were pretty calm by his account, an ignorant and worrisome statement to make in the face of danger.

He went on to say that he would strive for the free trade agreement between the UK and EU to remain but said the free movement of labour would certainly become restricted to protect British jobs. If anyone wanted some sort of clue to the direction the UK could be headed in they would do well following Mr Johnson's comments closely.

In saying this it cannot be said enough that the current political whirlwind throwing the British economy into disarray has direct influence from the very policymakers who tried desperately to twist the arm of the electorate into believing whatever propaganda they thought would've appealed to them. The vote day is over, the results are in yet the politicians haven't the slightest idea on the next plan of action.

It seems as if the majority of British politicians aren't satisfied with the way polling has gone leading many to believe their could be a plot twist to a dramatic political play. What will it be?

We aren't certain of it yet which stokes the fires of fear even more at a time when politicians should be concentrated on finding a long term solution that doesn't hinder the outlook of the economy.  

Boris Johnson says UK will continue to have access to European Union's single market https://t.co/bbSub0AExp pic.twitter.com/DeRNoDoqAZ

— Reuters Top News (@Reuters) June 26, 2016