By definition, the name of the game in charting is ideally to be able to identify a well-defined patterns which have been in place over a long period and therefore are backed by probability to be all the more reliable.
The present daily chart configuration of Silence Therapeutics PLC (LSE:SLN) looks to have just such a pattern in the form of an extended base/U-shaped reversal which has been in place since last year’s March/April peaks towards the 400p level. Indeed, it was always expected that there would be some kind of consolidation after a very strong run which saw the shares double from the beginning of December 2013 to the end of the first quarter of last year.
The current bullish configuration is backed by two additional key features. The first is October’s brief bear trap probe towards £1.50 and then the subsequent higher lows the shares have put in place over recent months.
The second is the way that in January we have seen a break above the still falling 200 day moving average, something which if sustained would be as powerful signal as the overall post April price pattern. The best way forward currently is probably to regard the shares as being in a rising trend channel from May with the floor of the channel currently running at the 50 day moving average level £2.11.
While this notional double support zone remains in place on a weekly close basis we can look towards the top of the 2014 channel at 300p plus over the next 1 to 2 months, something which offers a reasonable risk reward technical trade.
