M&S: Recover or be taken over

MARKS & Spencer, Britain's favourite but fading retailer, posts results tomorrow.

If the last few weeks are anything to go by, buying shares could be a fairly safe bet for private investors. To find out why, we need to take a technical look at share price movement.

Way back in 1998 M&S stood at a well turned-out 600p. But from then on, shares followed underwear sales ... and went down.

Touching an unfashionable low point of just 175p in 2000, takeover rumours gave the stock enough reason to rally back above 400p. But new management couldn't turn the retail mammoth around quickly enough, and M&S entered a technical downtrend.

Shares were forced lower with analysts closely watching for new opportunities to sell more. Interestingly, a year ago a new support line emerged, offering investors a respite from renewed downward pressure. This horizontal line intersects the chart at around 170p, and shares have bounced up from this level on many occasions.

That is until April this year when the group reported continuing weak trading performance for the year to March 2004. M&S shares broke the key support level and traded down to 260p. Analysts took this as a sign of more weakness and proclaimed that the stock was a 'sell' ... including me.

But after spending just three days beneath the horizontal 170p level, news of potential takeovers buoyed prices back above the line. And technical analysts all shouted 'buy'.

So what next for this national treasure? Technically, there's strong support at 170p. And fundamentally, if the price does crash through this level, the press will be filled with takeover rumours.

On that basis, buying M&S shares ahead of Tuesdays results and perhaps more importantly July's agm seems like a reasonable bet.

But beware! Takeover rumours have a shelf-life, and if Philip Green or A. N. Other doesn't step forward after a couple of months, the share price will suffer.

Stockwatch is written by William Akerman of Quantigma. For more views on techical analysis, go to www.quantigma.com

For the latest views on stocks and markets, listen to 'Market-Buzz‘ at www.easy2spreadbet.com

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