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

Last week, the benchmark FTSE All-Share Index (.FTAS) started on a bearish note and continued the downside movement. The index made a low of 4032.21 on Aug 19, 2021 and settled at 4082.53 with a loss of ~1.49 percent for the week ending Aug 20, 2021. The recent week started on a positive tone and prices are again trying to reach the territory of 4100 level. On the technical front, prices are trading in the middle of an ascending channel pattern, indicating an indecision status; however, the leading indicator RSI (14-period) is trading at ~60.70 levels and seems supportive of an upside movement. Prices are well placed above the trend-following indicators 21-period SMA and 50-period SMA, further indicating an upward movement.

As per the UK’s Office for National Statistics, the Retail sales volumes between June and July 2021 fell by 2.5% and impacted the index negatively. The Flash UK Manufacturing PMI and Flash UK Services Business Activity Index also declined for Aug 2021 compared to July 2021 (as per the IHS Markit) and further supported a downside direction. 

Global Markets Wrap-Up

Wall Street witnessed correction from the higher levels last week as the two benchmark indices traded in red. S&P 500 settled at 4441.67 with a loss of ~0.59 percent, while NASDAQ Composite Index settled at 14714.66 with a loss of ~0.73 percent for the week ending Aug 20, 2021. The market reacted negatively after the release of the latest FOMC meeting minutes that indicates the willingness of FOMC to start reducing asset purchases before the end of the year. However, a decline in the US weekly unemployment claims to 348,000 from 377,000 (revised level) in the prior week restricted further 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 Fresnillo PLC (LON: FRES) and EnQuest PLC (LON: ENQ) for the next 2-4 weeks duration:

Fresnillo PLC 

Fresnillo PLC (LON: FRES) is a holding company engaged in metal mining activities through its subsidiaries. The primary metals of its production include silver, gold, lead, and zinc. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

FRES' prices broke a falling wedge pattern on an upside on July 29, 2021, and since then trading above the upper band of the pattern, indicating an upside direction for the stock. Now an immediate resistance level for the stock appears at GBX 986 and prices may test the level in the short-term (2-4 weeks). A further breakout above GBX 986 may extend buying in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the Weekly chart, RSI is trading at ~46.72 levels and recovering from lower levels, indicating a positive trend for the stock. The weekly volumes also seem supportive of an upside movement. The CMP is above the 21-period SMA and further providing support for an upward direction; however, the 50-period SMA acts as resistance levels for the stock.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for that Fresnillo PLC is as follows:

General Recommendation:

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

EnQuest PLC

EnQuest PLC (LON: ENQ) is an oil and gas development and production company headquartered in London, UK. The company deals in the exploration, extraction, and production of hydrocarbons in the UK continental shelf and Malaysia. Noted below are the key price indicators for the stock: 

Price Action Analysis (on the Weekly Chart)

ENQ's prices sustaining above a downward sloping trend line breakout level for the past one month, indicating an upward direction for the stock. Prices recently started to move upside and for the short-term (2-4 weeks), we may expect continuity of the same. Now the next major resistance level for the stock appears at GBX 29.90 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 ~66.76 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 EnQuest PLC is as follows: 

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that EnQuest 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 in the ‘Entry Price’ can be considered depending upon the upside potential expected and taking into consideration the Target 1 and trailing stop-loss levels indicated. For example: - An Investor can consider entering the stock at or above a certain range (3%-5%) from the Entry Levels recommended depending upon the potential upside expected and difference from the Target 1 and Trailing-Stop Loss Levels indicated for the stock.

Note 1: 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 where-in 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 where-in 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: 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. We suggest ~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. 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. 

The reference date for all price data, volumes, technical indicators, support, and resistance levels is August 23, 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.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.