Structural survey of Jarvis reveals faults

ON Wednesday of last week, Jarvis plummeted some 47p on news that school refurbishment contracts have run well over budget. As a result of this, the accommodation services division is expected to report a loss of £5m instead of an expected equivalent profit.

To add fuel to the fire, the company warned investors that its dividend policy is under review, most likely resulting in a lower pay out this year.

There has been little good news from Jarvis during the past few months and the technical picture speaks for itself. The market has traded steadily down from the middle of last year, when the stock was trading close to 400p, down from the heady heights of 560p in spring of 2002.

Currently the share price is trading at 135p, having traded down to 123p on Wednesday of last week, following the disappointing news. This 123p level is significant, in that it is the low of the stock, on 21 February 2000, prior to the stock rallying towards its highs of 2002.

In addition the stock traded briefly down to 117p at the end of January this year.

So from a technical perspective the 117-125p is an area of support and, despite the bad news, this could create short-term buying opportunities with expectations of the share price rising back up to the 175-185p level of resistance, which is represented by the down trend which has been in existence from September of last year.

A close below 115p will undoubtedly result in a fresh wave of sellers driving the stock down to the psychological level of 100p.

So to summarise, the downward-sloping resistance trend line and the horizontal support line are likely to provide our trading range for the coming weeks. However, should the market break, through either technical line, stop-losses should be in place to protect trading capital.