March has arrived with Johnson and Johnson’s vaccine just around the corner and the Bank of England’s Deputy Governor Dave Ramsden saying they are ready to use negative rates if things worsen.
If you ask our opinion, the negative rates are only a matter of time in the UK. The neighbours in the European Union have been using them for a long time now; and it seems that once a government breaks the taboo, they tend to use them because it is interesting for the stock market which, as you already know, has a lot of power.
How has the FTSE 100 been behaving lately?
In the last weeks, the FTSE 100 made a resistance between 6,750 and 6,800 while its next support is in the 30-week exponential moving average (at 6440 right now) and the last trough in the end of January at 6,400.
Is it worth the long trade? If we take the next support and resistance, the potential wins and losses are even. From the current price to 6,750, there is a 2.87 percent profit and a 6,400 and 2.47 percent loss.
We do not think it is a good idea to make trades with potential results like those because when we get the trade right, we need it to compensate losses of the wrong ones and produce extra profits. With trades like this one, we would not achieve such a compensation in the long-term. As a result, this trade is not for us. Anyway, in the case of doing the trade, we would wait to convert the profits selling the position until it hits the next resistance at 6,880. That would mean a 4.85 percent win, which doubles the potential loss. The problem is, as we have mentioned above, we have another resistance before it; and it would not be surprising if the index moves up to touch the first resistance (6,750), and then rebound to touch the support making our stop-loss jump. So you better be prudent.
Our forecast
While the index respects the 30-week exponential moving average, we think the chances of going up are bigger than going down. In part because the DAX 30 of Germany has recently surpassed its historical top and also the AEX of The Netherlands looks to be in very good shape. We think that is good news for European markets.
You do not need a medallion stamp if you trade with UK stocks, but you may need it if you have shares of companies listed in U.S. or Canadian stock markets.
*This post was written when the FTSE 100 was at 6,561.85 on March 1, 2021.
**Nothing written here is or pretends to be financial advice, but just an opinion with entertainment purposes.
For more information on the Stock Market in march contact us today.