This report is an updated version of the report published on June 28, 2022, at 08:00 AM GMT+1.

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

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a positive note and continued the momentum. The index made a high of 3975.76 during the week and settled at 3975.07 with a decent gain of ~2.40% for the week ending June 24, 2022. The recent week also started on a positive note and prices surpassed the 4000 level. On the technical front, prices took the support of an upward sloping trend line and started to move upside, indicating the possibility of an upside direction. On the weekly chart, the leading indicator RSI (14-period) is sustaining below the mid-point and showing a reading of 44.50. Prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as the resistance levels.

The market sentiments turned positive despite the release of negative economic data during the week such as Flash UK Services PMI Business Activity Index, Flash UK Manufacturing PMI, and Retail Sales. Notably, the Consumer Prices Index (CPI) increased by 9.1% in the 12 months to May 2022 which is a new 40-year high.

Global Markets Wrap-Up

Wall Street rebounded sharply from the lower levels last week and the two benchmark indices ended in the green. The S&P 500 settled at 3911.74 with a gain of ~6.45%, while NASDAQ Composite Index settled at 11607.62 with a gain of ~7.49% for the week ending June 24, 2022. As per the U.S. Department of Labor, the initial jobless claims numbers decreased to 229,000 from 231,000 (revised level) in the prior and supported the bullish movement. 

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 one LSE listed stock pick from the technical standpoint. Noted below is our recommendation based on generic insights, entry price, target prices, and stop-loss for Zephyr Energy PLC (LON: ZPHR) for the next 2-4 weeks duration:  

Zephyr Energy PLC

Zephyr Energy PLC is a UK-based oil and gas company incorporated as an investment platform to aggregate interests in the Rocky Mountain region of the United States. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Daily Chart) 

ZPHR's prices started to recover from the lower levels after forming a positive divergence with the RSI (14-period) and recently given the breakout of a downward channel by the upside, indicating the possibility of further upside movement. Now the next important resistance level for the stock appears at GBX 5.70 and prices may test this level in the short-term (2-4 weeks). A further movement above GBX 5.70 may extend buying in the stock.  

Technical Indicators Analysis (On the Daily Chart)

On the daily chart, the RSI (14-period) is showing a positive status with a reading of 53.21, indicating the possibility of an upside direction hereon. The CMP is above the trend-following indicator 21-period SMA which acts as a support for the prices; however, the 50-period SMA is above the CMP and may act as the resistance level for the stock.

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, Zephyr Energy PLC is looking technically well-placed on the chart, and a ‘Speculative Buy’ recommendation has been given 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:

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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.

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 at which 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 at which 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: In general, 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. This report is based on ~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. Investors can 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 June 27, 2022. 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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