FTSE All-Share Index (.FTAS) Market Round-Up

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a marginally positive note and thereafter witnessed a volatile movement. The index made a low of 3968.19 during the week; however, settled at 4046.71 with an overall gain of ~0.44 percent for the week ending October 08, 2021. The recent week also started on a marginally positive tone and now the prices are consolidating around 4000 level. On the technical front, prices are trading around the lower band of an ascending channel formation and getting the support of the same. On the weekly chart, the leading indicator RSI (14-period) is hovering around mid-point and trading at ~55.98 level. Prices are well placed above the trend-following indicators 50-period SMA and 21-period SMA, supporting a positive stance.

An increase in the services PMI data released last week supported the market sentiments. As per the IHS Markit, the UK Services PMI Business Activity Index registered 55.4 in September, compared to 55.0 in August and supported the index. However, a decrease in construction PMI to 52.6 in September compared to 55.2 in August limited the gains. 

Global Markets Wrap-Up

Wall Street recovered marginally last week and the two benchmark indices ended in green. S&P 500 settled at 4391.34 with a gain of ~0.79 percent, while NASDAQ Composite Index settled at 14579.54 with a gain of ~0.09 percent for the week ending October 08, 2021. A decrease in the US weekly unemployment claims to 326,000 from 362,000 (revised level) in the prior week supported the indices to recover from the lower levels.

Having understood the US market performance over the past one week, taking cues from major global news, and based on our technical analysis of the FTSE All-Share Index (.FTAS) for the upcoming week, now let us have a look at the two FTSE listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for BAE Systems PLC (LON: BA.) and International Consolidated Airlines Group S.A. (LON: IAG) for the next 2-4 weeks duration:

BAE Systems PLC 

BAE Systems PLC (LON: BA.) is a defense & aerospace company that operates through five segments. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

BA.'s prices broke a crucial resistance level of GBX 562.80 by an upside on July 27, 2021 and since then hovering around the breakout level. Prices recently broke a downward sloping trendline by an upside, indicating an upward trend for the stock. Now the next important resistance level for the stock appears at GBX 673 and prices may test this level in the short-term (2-4 weeks). A further breakout above GBX 673 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the Weekly chart, RSI is trading at ~67.38 levels, indicating a positive trend for the stock. The weekly volumes also seem supportive of an upside movement. The CMP is above the 21-period and 50-period SMA, further providing support for an upward direction.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for that BAE Systems PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that BAE Systems PLC is looking technically well-placed on the chart, and we have a ‘Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

International Consolidated Airlines Group S.A.

International Consolidated Airlines Group S.A. (LON: IAG) is an airline company and its segments include British Airways, Vueling, Iberia, Aer Lingus, and Other Group companies. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

IAG's prices broke a descending channel formation by an upside on September 27, 2021, and since then sustaining above the upper band of the channel, indicating the possibility of upward direction. Now the next crucial resistance level for the stock appears at GBX 215 and prices may test this level in the short-term (2-4 Weeks). A further breakout above GBX 215 backed by volumes may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the Weekly chart, RSI (14-period) is trading at ~53.12 levels and indicating a positive trend for the stock. The weekly volumes also seem supportive of an upside movement. The CMP is above the 21-period and 50-period SMA, further providing support for an upward direction.

Financial Summary: 

Summary of the Key Financial Metrics for the past four years for International Consolidated Airlines Group S.A. is as follows: 

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that International Consolidated Airlines Group S.A. is looking technically well-placed on the chart, and we have a ‘Speculative Buy’ rating on the stock. Investment decision should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the FTSE All-Share Index and listed stocks’ prices.

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation in the ‘Entry Price’ can be considered depending upon the upside potential expected and taking into consideration the Target 1 and trailing stop-loss levels indicated. For example: - An Investor can consider entering the stock at or above a certain range (3%-5%) from the Entry Levels recommended depending upon the potential upside expected and difference from the Target 1 and Trailing-Stop Loss Levels indicated for the stock.

Note 1: Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the technical analysis has been achieved and subject to the factors discussed above. 

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point. 

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 50% of the Target 1. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is October 11, 2021. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

GBP: British pound sterling

GBX: British pence sterling

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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