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FTSE 100 Stocks Index Could Rally on Greek Resolution

Currencies / UK Stock Market Jun 24, 2015 - 04:03 PM GMT

By: Richard_Cox

Currencies

When we look at some of the biggest financial news headlines of the year, it is difficult to discount the continued discussions that have centered around the European sovereign debt crisis.  This might sound like a throwback to 2012, but these are issues that have once again resurfaced and might be even more important now than they were just a few years ago.  This is largely because there are factors that solidify the need of one or more countries to exit the monetary union. 


Chart Perspective:  FTSE 100

If this occurs, the added level of market uncertainty would suggest a period of prolonged weakness in regional stock valuations.  But if this does not occur, the positive surprise could easily ignite a new rally in the FTSE 100.  To be sure, the FTSE 100 is not as directly tied to the European monetary union as are indices like the German DAX or the French CAC 40.  But according to recent reports from market analysts at Mocaz, the peripheral nature of the UK economy means that its stock markets are well positioned for gains in times of reversing momentum in European assets.  Progress over the last few meetings with the Greek finance ministers suggests that a positive conclusion could be imminent, and this could send valuations higher for the FTSE 100. 

From a chart perspective, we are seeing a very strong turn in the daily RSI indicator, and this is momentum that now looks strong enough to break important historical resistance at 7100 for the FTSE 100.  We could start to see some sell orders placed near this level as there is still a good portion of the market that is willing to be contrarian from a short term perspective.  But if these areas of resistance are broken, all of those traders will be forced to close out their position and this in effect creates another level of buy orders just above 7100.  Breakout continuations are likely under this type of scenario, so an upside breakout here would be enough of a technical event to justify new buy positions.  With all of this in mind, there is good scope for traders that are looking to utilize call options in UK equity markets.  From both the technical and fundamental perspectives, clear arguments can be made if we see short term moves higher that are propelled by constructive talks amongst the Greek finance ministers.  

By Richard Cox

© 2015 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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