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GB 100 Index Technical Analysis - GB 100 Index Trading: 2016-12-16
Continued positive trend may lift UK market
UK economy has performed better than widely expected after Brexit vote. Will the GB 100 index continue rising?
The Bank of England left the interest rate unchanged at 0.25% at its meeting on Thursday following the decision by the Federal Reserve to hike rates 0.25 percentage point to the range 0.5 to 0.75 percent on Wednesday. The second reading of GDP indicated the British economy slowed slightly in the third quarter growing at the rate 0.5% on quarter in the three months to September down from a 0.7% expansion in the previous period. The decline was mainly due to lower domestic demand which was offset by increase in foreign trade. Recent sales data showed retail sales in November increased a healthy 5.9% compared with the rate same month last year, though less than the 7.2% in the previous month. At the same time last Inflation report indicated headline inflation rose to 1.2% in November from 0.9% in October as consumer prices increased 0.2% monthly from 0.1% growth in October. As higher inflation points to improved demand the labor report in turn showed average earnings including bonus rose 2.5% in October from upwardly revised 2.4% the previous month. With data after Brexit indicating the UK economy fared much better in the aftermath of the referendum decision to leave the European Union, the uncertainty over results of exit negotiations poses the most downside risk for British economy which has been offset by positive effects of Pound depreciation. On December 23 the final reading of Q3 GDP will be published, no changes are expected. And on December 23 GfK Consumer confidence index will be reported, a slight improvement is expected.
On the daily chart GB100: D1 has been rising bouncing off the 50-day moving average MA(50) after breaching above the resistance line of the downtrend.
- The Parabolic indicator has formed a buy signal.
- The Donchian channel has tilted upward, indicating uptrend.
- The MACD indicator is above the signal line with the gap widening. This is a bullish signal.
- The stochastic oscillator is approaching the oversold zone.
We believe the bullish momentum will continue after the price breaches above the upper Donchian bound at 6986.11. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the last fractal low at 6868.49. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (6868.49) without reaching the order we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Buy |
| Buy stop | Above 6986.11 |
| Stop loss | Below 6868.49 |
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