As we begin the new month, an interesting situation has presented itself in the stock market today. The riskier stocks on the UK 100 have rallied hard from their 2016 low points and are understandably taking a break - some have risen by over 100% after all! Yet there’s another interesting observation we’ve made. Several UK 100 blue chip stocks have made fresh all-time highs in 2016. These stocks are, in the main, defensives and have been quietly trudging north in the background while all the attention has been on the popular but rather wild miners and banks - understandably, you might think, what with the turmoil we experienced in January and February.

But the Brexit fears (UK referendum on exit from EU) everyone has spoken of don’t appear to have manifested themselves in the stock markets. China continues to be China. Perhaps most pertinent is an impressive oil price recovery rally that’s surpassed anything the wider commodities space has had to offer. 2016 has seen risk assets rally hard from their lows while defensives have pushed on to make fresh all-time highs. Win-win.

The point is that with riskier stocks rising, indicating increasing confidence, one would expect defensives to sell off at the same time. But with defensive, non-cyclicals trading at or near all-time highs this implies that the moves thus far have been speculative in nature and that funds have yet to flow from safer investments to riskier ones. This is a potential bullish signal for the stock market today, indicating there could be more upside for cyclical stocks. 

If you think you missed out on the rally, think again. If you’re still a little risk averse, then there are still attractive dividend plays out there too. There’s something for everyone.

The above table gives the UK 100 stocks trading closest to their 17-month highs – in some cases these were recent all-time highs. They are for the most part defensive stocks.

How can you figure out which stocks to buy?

The table below is an interesting starting point if you're wondering which stocks to buy right now. It highlights those that are furthest from their 17-month highs. You’ll notice that the stocks with furthest to go are in some cases those that have rallied hardest of late! It shows that, if these stocks can maintain their upwards momentum, there’s still a hefty amount of upside to be had. The defensives should also be watched closely for signs they’re pulling back. Indeed, the likes of Severn Trent (SVT), National Grid (NG.) and British American Tobacco (BATS) are up to 5% off their highs already. This could well keep the cyclicals supported.

The above table shows the 10 stocks with the most upside potential in terms of the distance from current levels to their 17-month highs. Some have already made impressive recoveries from their 2016 lows (in some cases all-time lows). Some are currently consolidating or correcting - will they rebound once more and continue their northerly course? Others remain close to their 2016 lows – do these now represent the notable ‘bargain blue chip’ opportunities of the year?

We’ve analysed the entire UK 100 for its recovery potential and to try to figure out which stocks to buy. For a full rundown simply sign up for our free 2-week research trial, at which point you’ll be able to ask us all the questions you want about the markets and experience for yourself the award winning service we offer.

In the meantime, why not have a look through our selection of 7 stocks that could make you some money over the summer – whether from an income or capital gains standpoint? Some are stocks that have already posted good gains and are arguably still carrying a decent amount of momentum, while others remain close to their year-to-date lows. All have potential to register large share price moves in the coming weeks or months.

Our picks include Standard Chartered (STAN), Anglo American (AAL), Barclays (BARC), Pearson (PSN), Shire (SHP), easyJet (EZJ) and ARM Holdings (ARM).

We’re sure you’ll find an idea or two in what follows!

ARM Holdings (ARM); Technology

An uncertain outlook for Apple has hurt the ARM share price - ARM's chip blueprints are licensed out to virtually every smartphone and tablet manufacturer in the world. Yet if Apple’s losing market share, it’s losing it to someone else so there’s little reason to be concerned demand-wise. Price action is holding up around intersecting support, with brokers on average seeing 20% upside from here. While the most bearish analyst sees ARM shares overpriced to the tune of 30%, the distribution has a clear bullish bias with 16 out of 20 target prices above the current price.

Consensus Roundup

Most Bullish: Goldman Sachs, Buy/Neutral, Target 1400p (+50%)

Consensus: Target: 1117p (+20%)

Most Bearish: Liberum, Sell, Target 650p (-30%)

easyJet (EZJ); Airlines

Consensus roundup

With the rebound in the oil price and terrorism fears weighing on travel stocks of late, it’s no surprise that easyJet shares have had a tough start to the year. However, we may now be seeing oil top out amid comments by OPEC members concerning a ramping up of output (or at least no imminent output cut) while the traditional seasonal demand for flights is set to pick up once more. The terror threat is low, like the share price. The most bearish broker is still seeking 0.6% upside, consensus sees 27% while bullish analysts are looking at 48% from current levels.

Most Bullish: Credit Suisse, Outperform, Target 2137p (+48%)

Consensus: Target: 1834p (+27%)

Most Bearish: Kepler Chevreux, Reduce, Target 1450p (+0.6%)

Shire (SHP)

The Shire stock price: Consensus roundup

Considering the fact that many defensives are now at or near all-time highs, the Shire stock price could offer potentially the best opportunity in this report. One of a few UK 100 stocks that currently have NO sell ratings, even the most bearish target is attached to a bullish rating and is seeking 23% upside from current levels. A recent break above falling highs resistance is also encouraging. Will we see the 200-day moving average tested soon?

Most Bullish: MainFirst Bank, Outperform, Target 6000p (+48%)

Consensus: Target: 5450p (+34%)

Most Bearish: Credit Suisse, Outperform, Target 5000p (+23%)

P.s. If you’d like to know which other stocks have no sell ratings, then sign up to trial our research for 2 weeks.

Barclays (BARC); Banks

Barclays stock: Consensus roundup

There appears to be a relentlessly bullish outlook for the UK’s depressed banks – no one seems willing to make the bearish call ahead of some mythical imminent share price explosion. Stranger things have happened! Even the most bearish broker is seeking 5% upside for Barclays stock and there have been no sell ratings issued since 3 March. All 21 price targets since then have been above the current price. Could a recent bounce off July 2012 lows see shares back towards 220p and the 200-day MA?

Most Bullish: Jefferies, Buy, Target 287p (+77%)

Consensus: Target: 214p (+32%)

Most Bearish: Exane BNP Paribas, Underperform, Target 170p (+5%)

Pearson (PSON); Media & Education

Consensus roundup

Broker ratings indicate net confidence in Pearson. 13 out of the 17 brokers covering the stock have set their targets above the current price while the average target is 11% higher. Hopes remain that the Pearson share price can stay above its 100-day moving average. If it breaks below, however, then short term downside is surely on the cards. Our analysts keep their eyes open for bounces and breaks around key support and resistance levels on the most popular UK 100 stocks. To receive this information direct to your inbox, check out the Accendo markets research offering here.

Most Bullish: Natixis, Buy, Target 1150p (+45%)

Consensus: Target: 880p (+11%)

Most Bearish: Liberum, Sell, Target 450p (-44%)

Anglo American (AAL); Miners

Consensus roundup

The speed and magnitude of the rebound in Anglo American shares thus far in 2016 has been seen as potentially overdone by those brokers covering the stock. Current consensus has an average target price of 487p, some 25% below current levels with 18 out of 25 brokers agreeing that shares are now overvalued. Note, however, Bernstein’s extremely bullish call on 5 May valuing shares at 1010p – some 53% above the current share price – while even Barclays can’t bring itself to explicitly say ‘sell!’

Most Bullish: Bernstein, Buy, Target 1010p (+53%)

Consensus: Target: 487p (-26%)

Most Bearish: Barclays, Underweight, Target 225p (-66%)

How can you take advantage of these potentially attractive share price moves?

Whether you see shares in Anglo American going up or down in 2016, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with our free, no nonsense research. We aim to deliver daily market reports and trade ideas direct to your inbox. We're execution only so there's no obligation to act - simply have a look and see what you think! You can sign up here to receive it.

CFDs: Like shares, but more flexible

Buying 1,450 shares in British Land @ £6.90 requires an outlay of around £10,000 plus commission (see purple box above left), while the same exposure via a CFD requires about £500 plus commission (see green boxes above right). If a trader invests in British Land, one would assume she believes the share price is likely to move in her favour. After considering the ‘worst case scenario’ and assigning funds to cover it,  the trader may conclude there’s little point in exposing the full £10,000  to the BLND shares - some of that capital could be put to good use elsewhere in the markets.

CFDs are leveraged instruments, but you don’t have to use the leverage

If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure.

The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into an Accendo trading account and take the equivalent CFD position which will tie up just £500 (note that overnight financing costs will still apply). The remaining £9,500 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!

What’s your view?

Think shares will rise? Take a long position by buying (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios click here.

How Accendo Markets can help you

We won’t tell you what to do - it’s your call whether you buy or sell. Our aim is to provide the help you need, if you need it. We’ll highlight opportunities which may be profitable to you, the investor, and assist you in making your own trading decisions. Our approach focuses on these 3 elements:

1. Education - not obligation
2. Observations - not recommendations
3. Assistance - not persistence

Our unique, award-winning service provides you with the help and tools you need to make appropriate trading decisions in the financial markets, both to grow and protect your capital. Just imagine how you’ll feel when you’re confident enough to make you own investment and trading decisions, rather than blindly following those of an expensive advisory broker who really has no better chance of calling the market than you anyway.

Before taking a position in the Index or Stocks, be sure to contact Accendo for…

• Updates - How does the index or your preferred stock look in terms of investor sentiment? News and broker updates can emerge daily affecting share prices. Optimism can switch to pessimism in the blink of an eye depending on what’s going on around the world.
• How to use CFDs and Spread Bets to maximise your profit potential.
• How to use the tools available to minimise the risk involved