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Barclays profits surge, with the stock expected to end multi-year downtrend


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Barclays have proven just why they should retain their investment banking arm, with a jump in profits pointing towards a likely bullish drive from here.

BarclaysSource: Bloomberg
 
 Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 29 July 2021 

Barclays earnings provide bullish impetus

Barclays has given its shareholders plenty to celebrate today, with the bank posting an impressive £5 billion profit for the first half (H1) of 2021.

That ability to almost quadruple their profits for H1 provided a fresh bout of buybacks and dividends to reward investors banking on a pro-cyclical boost for the sector.

Part of the boost came from the ability to claw back provisions that had been made in anticipation of bad debts, with Covid-19 sparking a wave of defaults.

However, the government’s supportive measures managed to stave off much of those effects, with banks reclaiming those funds set aside in preparation of such losses. Meanwhile, the bank saw positive signs that consumer demand was starting to grow once again.

Nonetheless, much of the profits seen at Barclays came thanks to their investment banking division, drawing a line between the bank and its UK peers. The US banks have historically outperformed UK banks thanks in part to their more volatile trading divisions.

However, while shareholders had been pushing Barclays to shift away from their investment banking exposure, Jes Staley’s decision to fight off those moves have been justified today.

Instead, we could now see investors specifically look towards Barclays as a potential outperformer thanks to that greater risk profile.

Bullish breakout could bring long-term reversal

The stock managed to break up through the £1.80 resistance level back in March, with the decline in treasury yields seeing the stock ease back since.

However, we have seen price find support on the descending trendline, with price now stuck between two long-term lines.

With the rally through £1.80 bringing an end to the long-term downtrend, there is a good chance that we are set for another leg higher from here.

The fact that the stochastic is turning upwards after a period of downside highlights how momentum appears to be shifting in favour of the bulls.

 

Barclays weekly chartSource: ProRealTime

 

The daily chart highlights the uptrend in place over the past 16 months, with todays rally taking price back into that £1.80 region.

The declines seen over the course of the past three-months does still remain in play unless we see a rise through the July high of £1.78, yet the fact that the price appears to have topped out at that level does raise the likeliness that this recent pullback is over.

Further upside through that level would provide greater confidence of such a bullish surge, although ultimately any further downside would simply be deemed a buying opportunity unless the price breaks the £1.29 low established in January.

Find out more on how to buy, sell and short Barclays shares

 

Barclays daily chartSource: ProRealTime
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