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

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a negative note and made a low of 3918.94 on April 21, 2021. In the latter half of the week, prices recovered marginally from the weekly low but were unable to close in green and the index lost its 4 weeks’ winning streak and settled at 3965.16 with a loss of ~1.04 percent for the week ending April 23, 2021. The recent week started on a positive tone and prices are sustaining above the resistance turned support level 3900, indicating a positive direction for the index. On the weekly chart, prices are now sustaining above an upward sloping trend line and continuously taking support of it. The momentum indicator RSI (14-period) is trading at ~65 level and seems supportive for the positive movement. Prices are well placed above trend-following indicators 21-period and 50-period SMA, further providing strength to the index.

The positive Retail Sales data released by the UK Office for National Statistics in the latter half of the week helped the index to recover from the weekly low. The Retail Sales volumes in March 2021 witnessed an increase of 5.4% versus previous month due to the easing of the COVID-19 restrictions. The sales increased by 1.6% compared to February 2020, with the highest contribution from non-food stores.

Global Markets Wrap-Up

Last week, Wall Street paused for a breath and the two benchmark indices ended marginally down. The S&P 500 settled at 4180.17 with an overall loss of ~0.13 percent, while NASDAQ Composite Index settled at 14,016.81 with an overall loss of ~0.25 percent for the week ending April 23, 2021.

The market reacted to the news that the Biden administration plans to increase the capital gains tax by almost double. However, lower US weekly unemployment claims limited the downside movement in the index. As per the US Bureau of Labor Statistics, the weekly unemployment claims declined to 547,000 from 586,000 in the prior week and achieved the lowest level since March 14, 2020.

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 Pearson PLC (LON: PSON) and Elementis PLC (LON: ELM) for the next 2-4 weeks duration:

Pearson PLC (LON: PSON)

Pearson PLC (LON: PSON) is a media company headquartered in London, England and engaged in publishing and education. The company provides content, assessment, and digital services to learners, employers, governments, educational institutions, and other partners globally. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

PSON's prices broke a downward sloping trend line at GBX 748.00 on January 26, 2021, and since then prices are hovering around the breakout level. For the past 2 months, prices are consolidating at higher levels with a positive bias which indicates an upside direction for the stock. Now the next immediate resistance level is at GBX 951.50 and prices may test that level in the short-term (2-4 weeks). A decisive breakout above GBX 951.50 accompanied by the volume may extend buying in the stock till the next major resistance level GBX 1030.

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 are showing an increasing trend and 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 Pearson PLC (LON: PSON) is as follows:

General Recommendation:

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

Elementis PLC

Elementis PLC (LON: ELM) is one of the UK’s leading specialty chemical company. The company's business segments include specialty products and chromium and operate in United Nations, Europe, and Asia. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

ELM's prices are sustaining above a downward sloping trend line breakout level for more than 2 months, indicating a positive direction for the stock. Prices recently started to move upside after taking support of 21-period SMA and for the short-term (2-4 weeks), we can expect further upward movement in the stock. Now the next major resistance level appears at GBX 185 and prices may test the level in the coming sessions. A decisive breakout above GBX 185 may further extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~69 levels and indicating a positive trend for the stock. The weekly volumes are showing an increasing trend and 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 Elementis PLC is as follows:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Elementis 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 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 April 26, 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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