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City Trade: Persimmon's firm foundations

TRADING IDEA: The UK's leading home constructor looks set to build itself a rally
January 11, 2011

There are finally some signs of life in the housebuilding sector, with a number of shares showing signs of bottoming out, says Richard Perry at www.centralmarkets.co.uk.

IC TIP: Buy

Persimmon - the largest of them - has had a strong break above 415p, which now implies a target of 494p. A subsequent correction has found important support above the 200-day moving average and suggests an improving outlook. Positive moving averages, improving momentum and now a broken 18-month down trendline all indicate increasing bullish control. A test of resistance at 520p cannot be ruled out in due course. Place stops below support at 380p.

IC Trades are written by Investors Chronicle writers. City Trades are written by selected external contributors. Both are based on the interpretation of patterns on a share price chart, rather than on fundamental analysis of the company's business or prospects.

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