Barclays share price forms risky patterns ahead of earnings

Barclays share price pulled back last week as the Bank of England (BoE) delivered its interest rate decision and as traders waited for its upcoming earnings, which will provide more color about its business. BARC was trading at 480p, down from the year-to-date high 505p. Like other European banks, its stock remains much higher than last year’s low of 221p.

Barclays to publish its earnings on Tuesday

BARC stock price retreated last week after the Bank of England (BoE) delivered its interest rate decision. As was widely expected, the bank decided to leave interest rates unchanged, citing the elevated inflation in the country.

Still, the bank hinted that it may cut interest rates by 0.25% in the coming meeting in March as investors anticipate the country’s inflation will move below the 2% target in the coming months. 

In theory, a BoE rate cut should have an impact on its business by reducing its net interest income (NII). In practice, however, the banks are using structural hedges to limit the impact.

The next key catalyst for the Barclays share price will be its earnings results, which will come out on Tuesday this week. 

Its most recent results showed that its business did well in the third quarter, helped by its consumer and corporate business. Its income jumped to £7.2 billion, with its nine-month one hitting over £22.1 billion. The profit before tax jumped to £2.1 billion in the third quarter, while the closely-watched Return on Tangible Equity (RoTE) came in at 10.6%.

All of Barclays’ business made improvements during the quarter. Its UK income rose 16%, while UK Corporate Bank and Private Bank and Wealth Management rose by 17% and 3%, respectively.

Most importantly, the company’s investment bank continued growing as mergers and acquisitions (M&A). This growth will likely continue as analysts expect corporate actions will continue booming this year.

For example, mergers and acquisitions, IPOs, and debt raising continue to rise this year. Some of the top IPOs to watch this year will be companies like Anthropic, OpenAI, and SpaceX. Barclays will benefit from these trends as it is one of the biggest companies in the industry.

Data compiled by Barclays shows that analysts expect the upcoming results will show that its net interest income will come in at £3.35 billion, with its other net fees coming in at £3.18 billion. If this is correct, its annual NII is expected to come in at £12.7 billion, with its fees rising to over £14.4 billion.

The quarterly profit before tax for the quarter is expected to come in at £1.32 billion, with the annual figure being £7 billion. Barclays is expected to announce a £1 billion share buyback.

Barclays share price technical analysis 

The weekly timeframe chart shows that the BARC stock price peaked at 505p last week and then pulled back to the current 480p.

A closer look shows that the stock is forming a bearish divergence pattern, with the Relative Strength Index (RSI) moving from a high of 78 in January to the current 71. The two lines of the MACD indicators are about to form a bearish crossover pattern.

Additionally, the stock has formed a doji candlestick pattern, which is made up of a lower and upper shadow and a small body. It is one of the most common bearish reversal signs in technical analysis.

Therefore, there is a risk that the stock will retreat after the earnings. If this happens, the next key target to watch will be at 450p. A move above the year-to-date high of 505p will invalidate the bearish outlook.

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