As the NatWest share price moves to a bear market, is it a buy?

NatWest (LON: NWG) share price has been in a strong bearish trend in the past few months as concerns about the UK economy continued. The stock retreated to a low of 236.60p on Wednesday, the lowest level since November 2022.

US government bond crisis

UK banks have been under pressure in the past few months. It has crashed by more than 20% from the highest point this year, meaning that it has moved into a bear market. 

This decline has happened in a time when the UK is going through a major crisis. For example, as I wrote in this article, UK gilt yields have surged to the highest level in years. These yields have crossed the levels where they tested during the ‘mini budget’ crisis.

NatWest stock price tumbled on Wednesday after the UK published mixed economic data. The data revealed that UK inflation continued rising in May of this year. Precisely, the headline consumer price index rose by 8.7%. Core inflation rose from 6.8% to 7.1%.

Additional data revealed that public debt increased at a slower pace in May. It dropped from over 22 billion pounds in April to 19.22 billion pounds. In all, the country’s debt jumped to 100.1% of GDP for the first time since 1961.

The next key UK bank and finance news will be the decision by the Bank of England (BoE) scheduled for tomorrow. As my colleague wrote here, the bank is at crossroads since more rate hikes could push the country into a recession. Failure to hike rates, on the other hand, could lead to more inflation.

It is unclear how all these factors will affect NatWest and other UK banks like Lloyds and Barclays. However, on a positive side, NatWest seems to be doing well as evidenced by the recent results. Its operating profits jumped to £1.8 billion while its CET1 ratio came in at 14.4%.

NatWest share price forecast

NWG chart by TradingView

The daily chart shows that the NWG stock price has been in a strong bearish trend in the past few weeks. As it dropped, the stock moved below the important support level at 251.2p, the lowest level on May 5th. The stock has also dropped below the 25-day and 50-day moving average. It is slightly above the 50% Fibonacci Retracement level.

Therefore, the outlook of the stock is bearish as sellers target the key support level at 200p. For this to happen, the shares need to move below the support at 236.6p since it will invalidate the double-bottom pattern.