Waiting for the Footsie to Strut Its Stuff

12/07/2010 10:11 am EST


Deborah Owen

Columnist, The IRS Report

If the UK’s FTSE-100 index were to break above its April high, shipping news publisher Informa might come along for the ride, writes Deborah Owen in The IRS Report.

After the surprisingly strong third-quarter UK gross domestic product figures, the chances of the Bank of England putting more money into the economy in the short term are receding.

Indeed, one member of the Monetary Policy Committee even voted to increase interest rates at their last meeting.

But even within the Bank opinion is divided. Adam Posen, another external committee member, has warned that the economy faces strong headwinds next year when the value-added tax goes up to 20% and the government's spending cuts begin to bite.

In the US, where unemployment remains stubbornly high, the Federal Reserve seems much more likely to press on with bond purchases.

Trying to gauge to what extent investors' expectations of such purchases are already factored into prices is a tricky business. But, fortunately, the charts are less ambiguous. The FTSE-100 is within sight of its April peak of 5825. A push above this level would be a bullish development, triggering a buy signal.

One share that encountered heavy overhead resistance at the April high but has now pushed above it is Informa (London: INF). The company was formed out of the merger in 1998 of IBC Group plc and LLP Group plc (the latter was, among other things, publisher of the shipping trade newspaper Lloyd's List).

The share price found good support from the rising 200-day moving average on the pullback in June and it has subsequently been outperforming the rest of the market. The break through the resistance at 422 pence indicates strong buying momentum that could take the shares back up to their 2007 high of 520 pence. A move below the 200-day moving average would rule off the uptrend and so would act as a useful stop-loss trigger.

[Informa shares have since pulled back, but bounced off support at the 200-day average. Shares closed at £4.09 in London Monday—Editor.]

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