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

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a marginally positive note; however, settled at 4108.91 with an overall loss of ~0.37 percent for the week ending October 22, 2021. The recent week started on a positive tone and now the prices are consolidating above 4100 level. On the technical front, prices started to move upside from the lower band of an ascending channel formation which indicated an upside direction for the index. On the weekly chart, the leading indicator RSI (14-period) is trading at ~59.21 levels and indicating an uptrend. Prices are well placed above the trend-following indicators 50-period SMA and 21-period SMA, further supporting a positive stance.

Last week, the market sentiments were impacted due to negative retail sales volumes data which fell by 0.2% in September 2021. However, improved numbers for Flash UK Services Business Activity Index and Flash UK Manufacturing PMI released by IHS Markit supported the index. As per the UK office for National Statistics, the Consumer Prices Index (CPI) increased by 2.9% in the 12 months to September 2021, compared to 3.0% in the 12 months to August 2021.

Global Markets Wrap-Up

Wall Street edged further higher last week and the two benchmark indices ended in green. S&P 500 settled at 4544.90 with a gain of ~1.64 percent, while NASDAQ Composite Index settled at 15090.20 with a gain of ~1.30 percent for the week ending October 22, 2021. A further decrease in the US weekly unemployment claims to 290,000 from 296,000 (revised level) in the prior week acted as the catalyst for an upside direction.

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 Hochschild Mining PLC (LON: HOC) and Alfa Financial Software Holdings PLC (LON: ALFA) for the next 2-4 weeks duration:

Hochschild Mining PLC 

Hochschild Mining PLC (LON: HOC) is a metals and mining company that deals in silver and gold mining, processing, and sale. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

HOC's prices are sustaining above the upper band of a falling wedge pattern, indicating an upside direction for the stock. Now the next important resistance level for the stock appears at GBX 183 and prices may test this level in the short-term (2-4 weeks). A further breakout above GBX 183 backed by volumes may extend buying in the stock. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~45.89 and recovering from lower levels after forming a positive divergence, indicating a positive trend for the stock. The weekly volumes also seem supportive of an upside movement. The CMP is above the 21-period, further providing support for an upward direction. However, the 50-period SMA may act as the resistance level for the stock

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Hochschild Mining 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:

Alfa Financial Software Holdings PLC

Alfa Financial Software Holdings PLC (LON: ALFA) is the developer of Alfa Systems, a software platform for the asset finance industry. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

ALFA's prices broke a crucial resistance level of GBX 150 on September 20, 2021 and since then trading above the breakout level, indicating an uptrend for the stock. Prices recently started to move upside and for the short-term (2-4 weeks), we can expect continuity of a positive direction. Now the next crucial resistance level for the stock appears at GBX 210 and prices may test this level. A further breakout above GBX 210 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 ~73.44 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 Alfa Financial Software Holdings PLC is as follows: 

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Alfa Financial Software Holdings PLC 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: 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 25, 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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