London Stock Exchange (LSE) Market Round-Up

Last week, the benchmark FTSE All-Share Index (.FTAS) broke the major resistance level of 3606.40 (16th November 2020) and traded above eight months’ high. It settled at 3586.51 with a marginal gain of ~0.74 percent on a weekly basis for the week ending 20^th November. The current week started on a flat note; however, prices are hovering around the major resistance level. The index is trading near a 61.80 percent retracement of the previous bearish rally. A breakout above the 3660 level could bring the index to the 3900 level in a short time span.

Global Markets Wrap-Up

Wall Street witnessed profit booking from the higher levels and S&P 500 settled at 3557.54 with an overall loss of ~0.77 percent weekly basis while Dow Jones Industrial Average settled at 29263.48 with an overall loss of ~0.73 percent weekly basis for the week ending 20^th November 2020. Last week, the US markets witnessed sluggish movement due to increasing COVID-19 cases coupled with higher weekly jobless claims data. However, the recent announcements by Pfizer Inc. (NYSE: PFE) and Moderna Inc. (NASDAQ: MRNA) regarding the higher effective percentage of their COVID-19 vaccines in the 3^rd phase of the trial limited the losses in the global equities.

Having understood the US market performance over the past one week, taking cues from major global news impacting the market sentiments, and based on our technical analysis of 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 De La Rue PLC (LON: DLAR) and Newriver REIT PLC (LON: NRR) for the next 2-4 weeks duration. 

De La Rue PLC

De La Rue PLC (LON: DLAR) is an FTSE-listed commercial services and supplies company that manufactures polymer and security products. Its authentication division provides physical and digital solutions including cheques, bank cards, ID security components, tax stamps and supporting software, authentication labels, etc. while the currency division is one of the largest printers of commercial banknotes.

Price Action Analysis (on the Weekly Chart)

De La Rue PLC’s prices broke the major resistance level of GBX 172 on the weekly charts on 18th November 2020 and prices are sustaining above that level. Prices also broke the ascending triangle pattern on the same day on the weekly chart, further indicating bullish movement in the stock. Now the next important resistance level is coming at GBX 230 and in the short-term (2-4 weeks), it can test that level. Any breakout above the GBX 230 level accompanied by the higher volumes may further extend the buying rally in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~64 levels, indicating a positive trend in the stock. The increasing trend in the volume is positive for the stock’s price action and supports the bullishness in the prices. The CMP is above the 21-period and 50-period SMA, further providing strength to the prices.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for De La Rue PLC is as follows:

 

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that De La Rue PLC is looking technically well-placed on the chart and we have a ‘Speculative Buy’ rating on the stock. Summary of our recommendation is as follows:

Newriver REIT PLC

Newriver REIT PLC (LON: NRR) is an FTSE-listed Equity Real Estate Investment Trusts (REITs) company that deals in retail and leisure assets. Its large portfolio covers community shopping centres, retails parks & community pubs.

Price Action Analysis (on the Weekly Chart)

Newriver REIT PLC broke the important resistance level of GBX 74 on the weekly charts on 17th November 2020 and prices are sustaining above that level. The prices also formed a positive divergence with the RSI and for the short term (2-4 weeks), we can expect further upside momentum in it. Now the next important resistance level is coming at GBX 93 and it can test that level in the upcoming sessions. Any breakout above the GBX 93 level accompanied by the higher volumes may further extend the buying rally in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~54 levels with a positive divergence with the price action, indicating a positive trend. The volume appears to be supportive of the stock’s price action and indicates bullish trend. The CMP is above the 21-period SMA, further providing strength to the prices, however, 50-period SMA act as a resistance for the stock.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Newriver REIT PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Newriver REIT PLC is looking technically well-placed on the chart and we have a ‘Speculative Buy’ rating on the stock. Summary of our recommendation is as follows:

Market events occur on a day-to-day basis depending on the frequency of the data and generally include 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 have 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.

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 and we consider stocks with greater than or equal to 200,000 volumes as more liquid. 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.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is 23^rd November 2020.

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: Trading decisions require a thorough analysis and technical reports in general chart-out metrics that may be assessed by investors. The above are illustrative analytical factors used for evaluating the stocks, other parameters can be looked at along with additional risks per se.

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