Lloyds share price has jumped this year, helped by its strong dividend growth and its performance. LLOY was trading at 76.45p on Monday, down from the year-to-date high of $78.95. It has jumped by over 50% from its lowest point this year. This article provides a forecast for the stock.
Lloyds share price technical analysis
The daily chart shows that the LLOY stock price has surged this year, moving from a low of 50.80p in January to a high of 78.95p in May.
As a result, the stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). This is a sign that bulls remain in control for now.
Lloyds stock price has formed a bullish flag, which is characterized by a vertical line and some consolidation. This pattern is one of the most positive patterns in technical analysis.
The stock has also formed a small falling wedge pattern, another bullish signal. This pattern comprises of two descending and converging trendlines, and often leads to a breakout once the two lines near their confluence.
Therefore, the most likely scenario is where the LLOY share price surges, potentially to the year-to-date high of 78.94p. A move above that level will point to more gains, potentially to the psychological point at 90p. A move below the support at the 50-day moving average at 73p, will invalidate the bullish outlook.
Why Lloyds stock is soaring
Lloyds share price has done well because of its strong financial performance. The most recent results showed that the company’s business is doing well.
Its net interest income rose to £3.294 billion, up from £3.276 billion in the same period last year. The other income rose to £1.452 billion, a sign that the company is doing well.
This growth happened as the net interest margin rose to 3.03% from 2.97%. Most notably, the return on tangible equity rose from 7.1% to 12.6%, while the CET1 ratio remained at 13.5%.
Lloyds Bank’s growth happened as more customers increased their deposits. Its deposits rose by £5 billion to £487 billion, a sign that its business was doing well.
Most importantly, unlike in the past, the company did not record any charge against motor insurance misselling claims as it did last year.
The company is also returning funds to its investors. It has continued to boost its dividends, a trend that will continue as it reduces its capital position from a CET1 ratio of 13.5% to 13%.
It has a dividend yield of 4%, higher than most British companies, which explains why it has attracted most retail investors in the country. It is also repurchasing its stock, which it hopes will increase its earnings per share.
Further, the stock is seen as being undervalued, with its price-to-earnings ratio of 12.6 and a price-to-book ratio of 0.95. Also, the British economy has done relatively well compared to other countries.
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