Will the market wipe the floor with Unilever?

UNILEVER will announce second-quarter results this Wednesday, which are eagerly awaited by investors and traders alike.

The shares have been under pressure for the last few weeks. But set against a backdrop of selling, many investors are choosing this moment to build their portfolio, snapping up some quality shares at discount prices.

In the search for stocks of strength, technical analysis can shine the light of some interesting trading opportunities. And Unilever looks like one of those stocks.

Unilever has declined by some 8% from its 30 June 545 1/2p high. Now trading at around 500p, this is a well-tested technical and psychological area of support. The stock has bounced back from the 500p support zone on four previous occasions - in August, September, and November and at the end of May.

On Monday the 500p area once more acted as support and might now be a catalyst for a medium-term bounce.

On the upside, first objectives are at 516p. This level supported the stock over three days in July and now acts as an interim price target. Any recovery in the Footsie will then allow Unilever to springboard up to 545p.

On the downside, if sellers force the Footsie into steep decline, a penetration of the 500p level is possible. A fall through 485p would put the future health of shares at risk, perhaps precipitating further losses.

Either way, Wednesday's news will set the trend for the next few months.

Portfolio builders should be less concerned with any temporary decline, as values are underpinned at lower levels. Short-term traders however must keep stop-loss orders at the ready.

Stockwatch is written by William Akerman of Quantigma. For more views on techical analysis, go to www.quantigma.com

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