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UK Stocks FTSE Poised for Bounce

Stock-Markets / UK Stock Market Oct 18, 2015 - 05:43 PM GMT

By: Richard_Cox


For most of this year, investors have been fixated on the monthly performances seen in the S&P 500.  There is good reason for this, as most of the market is still trying to assess whether or not the index can maintain its record levels into the end of 2015.  So it is not surprising to see ETFs like the SPDR S&P 500 Trust ETF (NYSE: SPY) getting as much attention as it has.  But when we take a step back and look for alternative trends in other areas of the market, some interesting opportunities start to become clear. 

One of the first names that comes up on this list is the FTSE 100, which has managed to find a base over the last two months and is now looking poised for new gains.  From a fundamental perspective, this outlook is supported by increases in corporate earnings performances seen in UK stocks.  Additionally, relatively subdued consumer inflation trends support the idea that the Bank of England will be able to hold-off on any significant interest rates increases well into next year. 

Chart Outlook:  FTSE 100

Source:  FiboGroup

In the chart above, we can see that the FTSE 100 has now posted a double-bottom just below the 6000 mark.  This is massive in terms of its importance because this creates a strong level of support that can be used in establishing long positions at these relatively subdued levels.  This is not something that can be said for other areas of the market (ie. the S&P 500), so chart activity in the FTSE is something that should be on the radar of every trader.

In terms of structuring trades, confirmation of the bias would come with a break of resistance at 6780.  If this does occur, we can expect prices to rise quickly back towards its April highs above 7000.  This scenario creates excellent prospects for structuring a solid risk-to-return ratio in stock trading.  This scenario is also taking place as the S&P 500 is finally starting to fall back from its record highs posted earlier this year. 

So when we combine the technical and fundamental outlook for the FTSE 100, there is clear scope for a solid run higher from the current levels.  These opportunities have not been highlighted in most of the financial media, as the FTSE is still viewed as being sluggish in terms of its ability to generate positive momentum.  As long as the BoE is able to maintain its conservative stance with regard to interest rates, there is little on the horizon to keep market prices from travelling higher.  Keep all of these factors in mind when looking to play off of the dominant trends that are now seen in the equities space.

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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