Legal & General Needs More Positives to Warrant Long-Term Optimism

By Dr. Declan Fallon

Legal and General (LGGNY.PK) was undergoing some heavy morning trading on Tuesday as the company reported a capital surplus of £1.6bn. The FT had earlier reported discussions with regulators about monies needed for potential defaults in its £22.5bn corporate bond portfolio.

“The reassurance seems to have assuaged concerns for now over L&G’s capital position,” said Martin Slaney, head of derivatives at GFT.

“Despite the initial denial of being in talks with the FSA, it appears that meetings in fact have taken place. The FSA wants to avoid a situation where insurers are the new banks. It needs to see sufficient reserves in place and we will continue to see volatility in the insurance sector as question marks over liquidity remain.”

The long term chart appears to have little room for optimism:

click to enlarge


Even the six month chart shows a frustrating decline which is some way from breaking either support or resistance. Tuesday's gains may have gathered the newspaper's attention, but investors will need something more to get truely interested.


If recent volume is to be an indication of a bottom then it will need to get past 54.86p and then 67.30p in short order. A break of the latter price will put an end to 6-month declining resistance, giving the stock some stability and turning 38.5p into significant support. Use Zignals Stock Alerts to notify you when these prices are broken or are close to a test.