Last week, the benchmark FTSE All-Share Index (.FTAS) started on a negative note and continued the momentum. The index broke a crucial psychological support level of 4000 during the week and settled at 3884.43 with a heavy loss of ~6.78 percent for the week ending March 04, 2022. The recent week also started on a bearish tone and prices are trading below the 3900 level. On the technical front, prices have broken the lower band of an ascending channel formation and are trading below the same, indicating a downside direction. On a weekly chart, the leading indicator RSI (14-period) is hovering around an oversold zone and currently is at 34.08 levels which indicate a downtrend. Prices are now below the trend-following indicators 21-period SMA and 50-period SMA, further supporting a negative stance.

The global equities market slid last week due to the ongoing war between Russia and Ukraine. The lack of any major economic data during the week further acted as a catalyst for indices to retain the bearish territory.

Global Markets Wrap-Up

Wall Street continued the bearish momentum last week and the two benchmark indices ended in red. The S&P 500 settled at 4328.87 with a loss of ~1.27 percent, while NASDAQ Composite Index settled at 13313.438 with a loss of ~2.78 percent for the week ending March 04, 2022. The market sentiments turned negative mainly due to the current geopolitical scenario despite the release of improved weekly US unemployment claims numbers.

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 LSE listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for Telecom Plus PLC (LON: TEP) and Petra Diamonds Limited (LON: PDL) for the next 2-4 weeks duration:

Telecom Plus PLC 

Telecom Plus PLC (LON: TEP) is a UK-based fully integrated multiservice provider holding company. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

TEP’s prices recently broke a crucial support level of GBX 1300 on the lower side but were unable to sustain below the same and started to move upward, indicating the possibility of an upside reversal hereon. Now the next important resistance level for the stock appears at GBX 1500 and prices may test this level in the short-term (2-4 weeks). A further movement above GBX 1500 may extend buying in the stock.  

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is recovering from lower levels and trading at 43.34, indicating a positive trend for the stock. The volumes also seem supportive of an upside movement. The CMP is above the trend-following indicator 50-period SMA, providing support for an upward direction; however, the 21-period SMA is above CMP which may act as a resistance level.

Financial Summary:

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

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Telecom Plus 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 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.

Petra Diamonds Limited

Petra Diamonds Limited (LON: PDL) is an independent diamond mining company that supplies rough diamonds to the international market. Its project portfolio consists of mines in South Africa and Tanzania. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

PDL's prices broke a crucial resistance level of GBX 114.25 by the upside on March 07, 2022 and are trading above the breakout level, indicating the possibility of a further upside movement. The recent upside movement in the stock is backed by volumes as well, further supporting a positive bias. Now the next important resistance level for the stock appears at GBX 132 and prices may test this level in the short-term (2-4 weeks). A further movement above GBX 132 may extend buying in the stock.  

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at 69.78 levels, indicating a positive trend for the stock. The volumes also seem supportive of an upside movement. The CMP is above the 21-period SMA 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 Petra Diamonds Limited is as follows:

General Recommendation:

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

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 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 March 07, 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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