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

Last week, the benchmark FTSE All-Share Index (.FTAS) traded with a negative bias for the entire week and made a low of 3765.63 on January 22, 2021. It settled at 3786.06 with a marginal loss of ~0.47 percent for the week ending January 22, 2021. The recent week also started on a significant negative note; however, prices are still holding the major support level of 3670 which will act as a decisive level for future direction. An immediate resistance level for the index is at 3900 whereas the support is at 3670. On the weekly chart, RSI (14-period) is trading at ~60 levels and seems supportive of the upside movement. Prices are also sustaining above 21-period and 50-period SMA, providing strength to the index.

As per the latest data released by the UK’s Office of National Statistics for the Consumer Prices Index (CPI) including owner occupiers’ housing costs (CPIH), the inflation rate was 0.8% in December 2020 compared to 0.6% in November 2020. The UK House Price Index rose 7.6% YoY in November 2020 versus 5.9% in October 2020, recording the highest growth rate since June 2016, while both positive numbers failed to provide any upside direction to the market.

Global Markets Wrap-Up

Wall Street edges higher last week after profit booking and both benchmark indices witnessed significant gains. S&P 500 settled at 3841.47 with an overall weekly gain of ~1.94 percent while Dow Jones Industrial Average settled at 30996.98 with an overall weekly gain of ~0.59 percent for the week ending January 22, 2021.

As per the latest data released by the US Department of Labour, the US claims for jobless benefits decreased last week to 900,000 from 926,000 in the prior week and impacted the market positively. The US President Mr. Joe Biden urged the US Congress to pass its largest stimulus of $1.9 trillion for the economic recovery from the pandemic, which further acted as the catalyst for positive market sentiments.

Having understood the US market performance over the past one week, taking cues from major global news, 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 stocks 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 Mitchells & Butlers PLC (LON: MAB) for the next 2-4 weeks duration:

Pearson PLC 

Pearson PLC (LON: PSON) is a media company engaged in publishing and education, headquartered in London, England. The company provides content, assessment, and digital services to learners, employers, governments, educational institutions, and other partners globally. The company was once the largest book publisher in the world. It has more than 22,500 employees operating in 70 countries. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart) 

PSON’s prices broke the ascending channel pattern by upside after almost 2 months of consolidation at GBX 730 on January 20, 2021, and currently, prices are hovering around the breakout level. Prices are also sustaining above the major support level of GBX 710 from the last 2 months and appear positive for upside movement. Now the next important resistance level is at GBX 863.60 and in the short-term (2-4 weeks), the prices may test that level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~69 levels and indicating a positive trend in the stock. The weekly volumes are showing an increasing trend and seem supportive of the upside movement. The CMP is above the 21-period and 50-period SMA and providing strength to the prices.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Pearson PLC 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:

Mitchells & Butlers PLC 

Mitchells & Butlers PLC (LON: MAB) is an FTSE-listed operator of approximately 1784 restaurants and pubs throughout the United Kingdom. The company’s branded restaurants and bars include All Bar One, Miller & Carter, Nicholson’s, Vintage Inns, O’Neill’s etc. The company also operates Innkeeper’s Lodge Hotels in the UK and Alex restaurants and bars in Germany. Noted below are the key price indicators for the stock:

Price Action Analysis (on the Weekly Chart)

MAB’s prices broke the major resistance level of GBX 259.29 on January 20, 2021, after 2 months consolidation. Prices are also sustaining above the upward trend line from the past 3 months and recently started to move upside. Now the next important resistance level is at GBX 348 and in the short-term (2-4 weeks), the prices may test that level. 

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, RSI is trading at ~67 levels and indicating a positive trend in the stock. The weekly volumes are showing an increasing trend and seem supportive of the upside movement. The CMP is above the 21-period and 50-period SMA with positive crossover, further providing strength to the prices.

Financial Summary:

Summary of the Key Financial Metrics for the past four years for Mitchells & Butlers PLC is as follows:

General Recommendation:

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

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 January 25, 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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