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

Last week, the benchmark FTSE All-Share Index (.FTAS) traded in a range of ~3937 to ~4040 and settled at 4002.61 with a marginal loss of ~0.24 percent for the week ending May 21, 2021. The recent week started on a positive tone and the prices are consolidating above the resistance turned support level 4000, indicating the possibility of an upward direction for the index. On the weekly chart, index prices are trading in a rising wedge formation and facing stiff resistance from the upper band of the pattern i.e., an upward sloping trend line. The leading indicator RSI (14-period) is trading at ~64.22 levels and seems supportive for a positive movement. Prices are well placed above trend-following indicators 21-period and 50-period SMA, further providing strength to the index.

The stable labour market overview for May 2021 coupled with the improved retail sales numbers helped the index to hold at 4000 level. As per the data released by the UK Office for National Statistics, the number of payroll employees has increased for the fifth consecutive month but remains below pre-coronavirus levels. The retail sales volumes also rose sharply in April 2021 with a monthly increase of 9.2%. However, an increase in the Consumer Prices Index (CPI) by 1.6% for 12 months ending April 2021 (including owner occupiers’ housing costs) weighed on index prices.

Global Markets Wrap-Up

Last week, Wall Street witnessed mixed movement and the two benchmark indices traded in the opposite direction. S&P 500 settled at 4155.86 with a loss of ~0.43 percent, while NASDAQ Composite Index ended its 4 weeks’ losing streak and settled at 13,470.99 with a gain of ~0.31 percent for the week ending May 21, 2021. As per the data released by the US Bureau of Labor Statistics, the US weekly unemployment claims reached the lowest level since March 14, 2020 and declined to 444,000 from 478,000 in the prior week, which restricted a major downside movement in the indices.

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 CMC Markets PLC (LON: CMCX) and Mitie Group PLC (LON: MTO) for the next 2-4 weeks duration:

CMC Markets PLC

CMC Markets PLC (LON: CMCX) is a UK-based financial services company. The company provides online financial trading in shares, contracts for difference (CFDs), spread, and currencies across various global markets. The company has a presence in UK, Ireland, Europe, Australia, New Zealand, Singapore, and Canada. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

CMCX's prices are forming a series of higher tops and higher bottoms and trading in an ascending channel formation for more than a year. Recently prices started to move upside after taking support of the lower band of the pattern at GBX 450 level, indicating an upward direction for the stock. Prices are also getting support from the 21-period SMA and for a short-term (2-4 weeks), we may expect positive movement in the stock. Now the next major resistance level appears at GBX 600 and prices may test the level in the coming sessions. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~61.29 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 with a positive crossover, further providing support for an upward direction.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for CMC Markets PLC is as follows:

General Recommendation:

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

Mitie Group PLC

Mitie Group PLC (LON: MTO) is a facilities management company headquartered in London, UK. The company provides services including security, engineering services, cleaning, catering, environmental services, and professional services. Noted below are the key price indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

MTO's prices are trading above an upward sloping trend line for the past 6 months, indicating an upward trend. Prices broke the major resistance level of GBX 67.00 on May 19, 2021 and since then hovering around the breakout level, further supporting a positive direction. Now the next major resistance level appears at GBX 88.00 and prices may test the level in the short-term (2-4 weeks). A breakout above the GBX 88.00 backed by the volume may extend buying in the stock till GBX 96.00 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~72.66 levels and indicating a positive trend for the stock. The weekly volumes seem supportive of an upside movement. The CMP is above the 21-period and 50-period SMA with a positive crossover, further providing support for an upward direction.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Mitie Group PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Mitie Group PLC is looking technically well-placed on the chart and considering the stock prices are trading near to its 52-week high, 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 on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

Note: 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.

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.

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.

Note: The reference date for all price data, volumes, technical indicators, support, and resistance levels is May 24, 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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