Barclays share price has moved sideways in the past few weeks. BARC peaked, formed a double-top pattern at 272.90 in December, and dropped to 263p today. It has rallied by over 315% from its lowest level in 2020, making it one of the best-performing banking groups in Europe. So, is the Barclays stock price about to dip after forming a double-top and a rising wedge?
Barclays business is doing well
Barclays, one of the biggest banking groups in Europe, is doing well, thanks to high interest rates in the UK and other countries. It will also benefit from the potential merger and acquisition (M&A) wave as interest rates fall and deregulation takes shape.
The most recent financial results showed that Barclays’ statutory Return on Tangible Equity (RoTE) rose to 12.3% in the third quarter, up from 11% in Q3’23.
Its group income rose by 5% to £6.5 billion. This revenue growth happened as Barclays UK revenue rose by 4%, while the investment bank revenue rose by 6%. The income growth in the consumer bank and private bank and wealth management dropped by 2% and 1%, respectively.
Most importantly, the company’s investment banking division, which has struggled in the past few months has started to do well. The investment bank division reported an income of £2.6 billion, a 6% higher than in the same period a year earlier.
Analysts expect the division to continue performing well in the coming months. Dealmaking usually performs well when interest rates are falling, and it also performs well when the American administration is open to more deals.
The Joe Biden administration was mostly against consolidation as it stopped several deals. For example, it blocked the merger of Spirit and JetBlue and, most recently, the Albertsons and Kroger merger.
Therefore, analysts anticipate that the Trump administration will embrace a light-touch regulatory approach and embrace more dealmaking.
The next key catalyst for Barclays’ share price will be the upcoming bank earnings season, which starts on Wednesday. Top banks like JPMorgan, Wells Fargo, Bank of America, and Goldman Sachs will publish their financial results.
These results are notable because they are similar to Barclays. Barclays offers similar services to Bank of America, including investment banking, wealth management, and retail banking.
Further, Baclays has room to grow its dividends in the near term. For one, the company has a CET 1 ratio of 13.8%, which could drop to about 13% in the next few months.
Barclays share price technicals points to a retreat
BARC stock chart | Source: TradingView
The daily chart shows that the BARC stock price has formed two chart patterns that could lead to a deeper dive in the next few months.
First, the stock formed a double-top chart pattern at 273p, with a neckline at 255p. This is a popular pattern that often leads to a steep bearish breakdown.
Second, it has formed a rising wedge chart pattern, which is made up of two converging trendlines. The upper side of this pattern connects the highest swings since August last year, while the lower side links its lowest point in August.
The stock has moved below the 25-day moving average. Therefore, more downside will be confirmed if it drops below the key support at 255p. A drop below that level will point to more downside, potentially to 238p, the highest swing in August last year.
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