This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
The traditional equity market Santa Rally has failed to materialise. October’s FTSE100 correction has embarked on a second leg lower. August’s downtrend is intact after the index’s failure to better May’s record high. We’re only just off fresh 2yr lows. The FTSE100 is -12.7% year-to date. Owch.
Market fears about a global trade war may be off the boil. However, the twin risks of tighter monetary policy and slower growth after years of stimulus remain prominent. So too does Brexit. In fact, growth may already be slowing amid the prospect of more expensive re-financing after years of cheap money. This is an issue which could be made worse by a US-China trade war or tighter monetary policy. Perhaps both, simultaneously.
Bears may be smiling, having called the October top, embracing more declines for oil sensitive names (Wood Group -22%; BP -5.9%, Shell -5.2%) as barrel prices have fallen further. Retail has suffered from fears about consumer confidence ahead of Brexit, online competition and structural issues (Next -16%, Kingfisher -16%, M&S -15%, AB Foods -13%, Sainsbury -12%). Banks are understandably lower on Brexit worries (Barclays -10%, Lloyds -8%, RBS -5%).
That said, Bulls are smiling too. Owners of Miners have outperformed (Fresnillo +12.3%, Anglo +10.5%, BHP +9.4%, Rio Tinto +6.7%, Evraz +6%, Randgold resources +3.7%). Many are also eyeing recent declines as offering more attractive entry points for January. The hope is 2019 makes for a more optimistic start, reversing some of 2018’s losses.
These are headline observations, however, and therefore assume no changes to investment decisions since end-November. They ignore the fact there have been lots of very tradable short-term opportunities even without a Santa Rally.
For example, in early December we saw breakouts by the likes of Smith & Nephew, Telecom Plus and Randgold resources, offering potential gains of 4-7% as the shares pushed further north. Attractive ranges included Ferguson, Rio Tinto and Shire which offered traders potential gains of 4-6% as they traded up off their respective floors. Momentum for Randgold Resources could have offered gains of 7% and declines of 8% on Standard Life Aberdeen for those prepared to short sell.
Since mid-month, those clients trading company results have had the opportunity to capitalise on a 20% move by Indivior and an 11% move by Balfour Beatty. Shares which have traded up off support included Pennon +6%, Imperial Brands +4% and Rio Tinto +6%. Rebound candidates this week included Ashmore, National Grid and Kier which all bounced 5%, 6% and 15%, respectively.
Six categories all offering very attractive moves, I’m sure you’ll agree. The FTSE is down (-3.9% since end-Nov) and, consequently, this is all the media will talk about. Most stocks have fallen, which the media will focus on. 40% of FTSE100 names are down more than 5% since end-Nov. 13% are down more than 10%. Only 20% in the black. Only a handful up by more than 5%. Sorry, no Santa Rally this year.
That doesn’t mean, however, that those in the red for December haven’t rallied at some point. Many have still offered the chance of some short-term upside. It’s our job to identify these situations daily to help our clients make profitable trading decisions.
Every day we offer our clients two short-term trade opportunities from each of the above categories (and much more). These ideas are for consideration, not advice. To join our clients in receiving all our daily trading ideas, click here to subscribe to our Gold Pass trading opportunity package. Think of it as an early Christmas present to yourself. Consider it a New Year’s resolution, ensuring you’re ready to make the most the multitude of trading opportunities which will materialise in January.
Happy holidays to all readers.
Mike van Dulken, Head of Research, 21 Dec 2018,
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.Prepared by Michael van Dulken, Head of Research