There seems to be optimism flowing back into European markets.
Particularly in the UK as, in the last month, we've seen the FTSE 100 recover over 18%.
This is due to a number of reasons including:
• The COVID-19 infection rate is slowing down
• Talks about the ease of strict lockdowns
• The pound strengthening at an alarming rate
• Investor confidence entering the stock markets again
• And more…
I don't normally predict a market bottom, but when I look at the news events and the charts, it tells me now is a great time to buy into the UK.
In fact, I expect a 21% recovery on the FTSE 100 in the next few weeks.
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The sell-off has triggered major buying opportunities
Since the beginning of the year, the FTSE 100 (UK 100) has fallen by over 35%...
And when you look at the micro-perspective, it suggests that many of the major UK companies are trading at a massive discount to their intrinsic values.
In fact, many of the companies are trading with P:E ratios in single-digits, which we haven’t seen for decades…
This means, now it could be a highly attractive opportunity for long-term investors to buy into the major UK companies which will push the index up further.
Thanks to the government intervention, the FTSE is set to soar
In the beginning of April, the Bank of England made an agreement to temporarily lend the government money to help finance the COVID-19 spending plans.
This extra government spending, was one of the measures used to combat the 2008 financial crash.
The BoE said that these measures will provide short-term relief and are designed to avoid causing unnecessary stress in credit markets.
This will also provide a short-term source of additional funding which will bring investor confidence back into the UK as it did in the Financial Crisis...
In fact, look at the chart below to see what I mean…
Looking at the above monthly UK chart…
The first red circle shows where the BoE announced to print out more money…
Afterwards came a rally of over 21% in just a few months (Green arrow)...
If history does end up repeating itself, with the government printing more money, we could see another 21% rally with the UK100 (FTSE 100)…
FTSE has broken out of its two-month downtrend and is ready to rally over 21%
In the above chart, you can see the daily price of the FTSE100…
Since February up until April 2020, it’s been on a continued downtrend from 7,500 down to 4,774 (downward pink line).
However, from the middle of March up until today, the price has been making higher lows (upward pink line).
And in April, the FTSE100 broke above the downtrend line for the first time this year. This means, that it’s now entered into a bull (upward trending) market.
Now to calculate where we can expect the price to head next, we’ll use the High-Low calculation which I use for most of my analyses.
Price target = (High - Low) + High
= (5,836 - 4,774) + 5,836
With the price currently at 5,674, we can expect the FTSE to rally to 6,898.
This is another 21% gain, which we can take advantage of…
How I am going to profit from the 21% rise in the FTSE 100
There are two ways to profit from the FTSE 100 rally.
First, I can buy the FTSE 100 CFDs and hold it until it hits my target of 6,898.
And second, I can follow Pickpocket Trader’s service where they look for offshore stocks that rally when the markets move up and crash when they drop in price…
Analyst, Red Hot Storm Trader
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