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

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a marginally positive note and post that traded in the range of 3776 – 3843 for the entire week. The index settled at 3842.23 with a marginal gain of ~0.45 percent for the week ending March 26, 2021. The recent week started on a flat tone and prices are still hovering around a downward sloping trend line breakout level. On the weekly chart, RSI (14-period) is trading at ~60 levels and seems supportive of an upside movement. Prices are well placed above 21-period and 50-period SMA, providing further strength to the index.

As per the retail sales data released by the UK's Office of National Statistics last week, retail sales volumes recovered partly in February 2021 with an increase of 2.1% as compared to the 8.2% fall in the previous month, although sales were still down by 3.7% compared to a year ago. The Consumer Prices Index increased by 0.7% in 12 months to February 2021, down from 0.9% to January 2021. The bunch of mixed economic events restricted the one-sided movement in the index.

Global Markets Wrap-Up

Last week, Wall Street witnessed mixed movement given the two benchmark indices moved in opposite direction. S&P 500 made a new lifetime high of 3978.19 and settled at 3974.54 with an overall weekly gain of ~1.57 percent while NASDAQ Composite Index settled at 13,138.725 with an overall loss of ~0.58 percent for the week ending March 26, 2021.

Markets rose on account of improved weekly US unemployment claims data. As per the data released by the US Bureau of Labor Statistics, the US unemployment claims decreased last week to 684,000 from 781,000 in the prior week and impacted the market positively.

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 of British American Tobacco PLC (LON: BATS) and Micro Focus International PLC (LON: MCRO) for the next 2-4 weeks duration:

British American Tobacco PLC

British American Tobacco PLC (LON: BATS) is a holding company that manufactures and sells cigarettes, tobacco, and nicotine products. It is the largest tobacco company in the world in terms of net sales as of 2019. The company operates in around 180 countries with brand names include Dunhill, Kent, Lucky Strike, Pall Mall, and Rothmans. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

BATS’ price broke a downward sloping trendline resistance level GBX 2770 on March 18, 2021, and since then hovering around the breakout level. Prices started to move upside after getting support around a 52-week low and for the short-term, and we can expect further upside movement in the stock. Now the next major resistance level appears at GBX 3309 and prices may test that level in the coming sessions. A decisive breakout above GBX 3309 accompanied by volumes may extend buying in the stock till GBX 3502 level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~56 levels and indicating a positive trend for the stock. The weekly volumes also seem supportive of the upside movement. The CMP is above the 21-period and 50-period SMA, further providing support for an upside movement.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for British American Tobacco PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that British American Tobacco 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:

Micro Focus International PLC

Micro Focus International PLC (LON: MCRO) is an FTSE-listed software and information technology company headquartered in Newbury, Berkshire, England. The company’s services allow organizations to transform and develop their business with four solutions namely Enterprise DevOps, Hybrid information management (IT), Predictive Analytics, and Security, Risk & Governance. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

MCRO's price broke the major resistance level of GBX 541.40 in the last trading session after almost 2 months of consolidation and closed above the breakout level. The breakout of the major resistance level after a decent consolidation indicates a positive trend for the stock and in the short-term (2-4 weeks) prices may test the next major resistance level of GBX 757.50 on an upside.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~65 levels and indicating a positive trend for the stock. The weekly volumes seem supportive of the upside movement. The CMP is above the 21-period and 50-period SMA, further providing support for an upside movement.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Micro Focus International PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Micro Focus International PLC is looking technically well-placed on the chart and considering the stock is trading near to the 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.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is March 29, 2021.

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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