Although it is said that no one rings a bell at the top or the bottom of the market, from a technical analysis perspective this is not strictly true. There is the equivalent of a high profile turnaround signal, and that is the exhaustion gap reversal. This has been seen to end last week for Deltex Medical Group (LON:DEMG), where the shares closed well above the top of Tuesday’s gap at 4.47p. Typically, one would now not see price action back below this level, as the shares surge after catching out the bears.
Indeed, one would imagine that quite a sharp bear trap effect would now be underway given that overall the stock had been in breakdown mode for the best part of 3 years. But the recent recovery of the 50 day moving average currently at 3.99p did provide the first hint of at least an intermediate rally being on tap, with this feeling coming after the February bear trap recovery of he former January 3.6p support. The likelihood now is that while there is no end of day close back below the latest gap top we shall see Deltex Medical Group head back as high as the top of a rising October price channel with its resistance line heading towards 10p. The timeframe is the next 1-2 months.
