Lloyds share price continued its strong bull run this month and is hovering at its highest level since 2007. Its gains continued this month after the Supreme Court ruling on motor insurance. It was trading at 84p on Monday, up by almost 70% from its lowest point in January. 

Technical analysis points to a Lloyds share price retreat

The daily timeframe shows that the LLOY stock price has been in a strong bull run this year. It bottomed at 50p in January and has now moved to 84p.

Trend indicators signal that the bull run may continue in the near term since the company will not publish its earnings report soon. The stock has remained above all moving averages and the Supertrend indicator.

Similarly, oscillators like the Relative Strength Index (RSI) and the MACD indicators have continued soaring this year, which is a bullish sign. 

The risk, however, is that the stock has formed the highly bearish rising wedge pattern. This pattern comprises of two rising and converging trendlines.

The upper line connects the highest swings since October last year. Similarly, the lower line connects the lowest swings since April when Donald Trump delivered his Liberation Day speech. 

The wedge pattern normally leads to a strong bearish breakout when the two lines near their confluence levels. 

A look at its oscillators show that bearish patterns are emerging. The two lines of the MACD indicator are about to cross each other, while the Relative Strength Index (RSI) has moved closer to the overbought level at 70.

Therefore, the most likely scenario is where the Lloyds share price has a strong bearish breakout. If this happens, the next point to watch could be the 100-day EMA, which is about 11% below the current level. The bearish Lloyds stock price will become invalid if it jumps above the psychological point at 90p. 

Lloyds stock chart | Source: TradingView

LLOY pullback to be healthy

To be clear: this technical analysis does not imply that there is anything wrong with the company. Instead, the pullback will be healthy such as in April when it crashed and then resumed the rebound. 

Lloyds Bank has strong fundamentals. For one, the Supreme Court ruled in the banks’ favor about motor insurance claims, meaning that the final payout will be smaller than the £1.2 billion it has set aside.

Most importantly, despite the potential payout, the ruling removes a cloud that has been hovering it in the past few months. 

At the same time, the company’s business is doing well as evidenced by the recent results. These numbers showed that it reported a statutory profit after tax of £2.5 billion for the first half of the year, with the underlying profit rising to £6.5 billion. 

Lloyds Bank also continued to reward its shareholders by boosting its dividends by 15%. This increase brought its dividend yield to approximately 3.65%, meaning that a £10,000 investment would yield around £365 in annual dividends. 

The company may continue boosting its payouts as its reduces the CET-1 ratio towards 3%. 

Read more: Here’s why the Lloyds share price has rallied this year

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