Lloyds share price forms a risky pattern as insiders sell, risky pattern forms

Lloyds share price has crawled back in the past few days, moving from a low of 108.25p on September 1 to the current 112.75. It is hovering slightly below the year-to-date high of 117p, and is up by 33% from its lowest level this year. It has soared by 218% in the last five years, bringing its market capitalization to over £65 billion.

Why Lloyds Bank has done well this year

LLOY shares have soared this year, helped by the ongoing rerating of European banks. Most European banks have soared in the past few months, with the closely watched iShares STOXX Europe 600 Banks ETF (EXV1) has jumped by 303% in the last five years and by 51% in the last 12 months. Other top UK banks, including the likes of Barclays, HSBC, and NatWest, have all jumped in these periods. 

In addition to the European bank rerating, Lloyds has done well because of the expectations that interest rates will remain at an elevated level for longer. The Bank of England (BoE) has left interest rates unchanged in the past few months, and Polymarket has a 55% chance that the bank will hike later this year. Banks often do well in a high-interest-rate environment because of the net interest margin.

Additionally, the company has boosted its shareholder returns in the past few years. It has continued to repurchase its shares, with management announcing a $1 billion plan in the last quarter. It also hiked its dividend by 30%, bringing its dividend yield to 3.55%. 

Now, the company is focusing on Accelerate 2030 strategy, which targets £2 billion in gross cost savings between 2027 and 2030. Part of these savings will be because of its investments in artificial intelligence. At the same time, Charlie Nunn, the CEO, hopes to increase its return on tangible equity (RoTE) to 20% by 2030, up sharply from the current 13%. 

The company aims to achieve this growth by investing in the United States and Europe. Still, there is a risk that this approach will backfire, as other European banks that attempted to enter the US faced. Companies like Deutsche Bank and Barclays have had to pare back their US entry recently.

Another risk for the stock is that its insiders are selling. The CFO has recently sold £10 million shares, possibly to book profits. 

Lloyds share price technical analysis

LLOY stock chart | Source: TradingView

The four-hour chart shows that the LLOY stock has come under pressure in the past few months. A closer look shows that it has formed a head-and-shoulders pattern, a common bearish reversal sign in technical analysis. This pattern often leads to a bearish reversal over time. It is now forming the right shoulder.

Therefore, the stock may retreat and retest the lower side of the head-and-shoulders pattern at 108p. On the other hand, a move above the year-to-date high of 116.70 will point to more gains, potentially to 120p.