More rises brewing for beer shares

RECENT takeover speculation has driven the share price of Scottish & Newcastle through an important level, in terms of technical analysis, forecasting that shareholders could soon be toasting further gains.

Linked to both Diageo and Carlsberg-Tetley, the company, Britain's last independent brewer, has been playing down recent takeover rumours. But bid speculation rarely hurts a share price, and more usually than not, it underpins stock values for some time.

From a technical perspective, the surge in share price has been enough to challenge the previous resistance level, enabling more froth in S&N shares.

Looking back, since the March lows of last year, the company has been trading within a triangle pattern. This formation usually indicates that a large move is on the horizon, and in late January this year the stock broke to the upside. A healthy spike in trading volume, further reinforcing the significance of the upward move, accompanied the break out.

Adding to this positive picture, S&N also broke through a rising trend line, forecasting a medium-term target of 480p and perhaps the psychological 500p level.

In summary, underpinned both technically and with the possibility of further bid rumours, expect shares to push up to the first resistance level at 450p, where some consolidation is possible.

Further strength will target 480p and perhaps 500p. On a cautious note, a close below 395p would signal a failure of the upward move with shares falling vulnerable to sellers.

Stockwatch is written by William Akerman of Quantigma, a firm that specialises in charting tools. For more, go to www.quanitgma.com.