Technical Analysis GB100 : 2017-12-12


Brexit may affect the dynamics of British stocks

The European Commission confirmed the successful completion of the first phase of negotiations on Britain’s exit from the European Union. Will the quotes of the British stocks grow?

The results of the talks will be introduced to the European Council, which is due to approve them on December 15-16, 2017. According to the President of the European Commission Jean-Claude Juncker decisive progress has been made. Probably earlier Brexit risks could hinder the growth of the British stock index FTSE 100. Since early 2017 it has risen by only 4.2%. This is much less than the growth of the German DAX (+ 14.6%), the French CAC40 (+ 11%), the Spanish IBEX (+ 10.3%). In fact, FTSE 100 has demonstrated the weakest increase since the beginning of this year among the major indices of the European countries. Meanwhile, the UK's economic indicators are quite positive. The GDP growth for the Q3 of 2017 was 1.5%. Industrial production in October increased by 3.6%. Theoretically, successful Brexit may have a favorable impact on the British stock market.

GB100

On the daily timeframe, GB100: D1 is in the neutral range and is moving towards its upper boundary. It has also exceeded the 200-day moving average line. The further price increase is possible in case of the publication of positive information in Britain.

  • The Parabolic indicator gives a bullish signal.
  • The Bollinger bands are narrowing, which means lower volatility. They are tilted upwards.
  • The RSI indicator is above 50. It has formed a positive divergence.
  • The MACD indicator gives a bullish signal.

The bullish momentum may develop in case GB100 exceeds the two last fractal highs and the upper Bollinger band at 7485. This level may serve as an entry point. The initial stop loss may be placed below the Parabolic signal, the two last fractal lows and the 200-day moving average line at 7277. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 7277 without reaching the order at 7485, we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

PositionBuy
Buy stopabove 7485
Stop lossbelow 7277

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