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The FTSE has just been upgraded by the OECD
This is a big deal.
The OECD (The Organisation for Economic Co-operation and Development) just upgraded its global growth forecast.
In fact, it’s upgraded the UK's growth rate this year by almost 1%, taking it to 5.1%.
This is based on the speedy vaccine rollout that is currently taking place.
And Deutsche Bank economists confirmed a bullish outlook on the UK economy.
They've analysed that with the higher savings rate, this will lead to an increase in spending after the lockdown. This could result in a 0.5% to 1% GDP boost, which will help with the FTSE rally.
Also the latest UK budget speech supported both spending and real estate. And this should push the FTSE 100 higher.
When the pound crashes, stocks will rise!?
This may seem like an arbitrary statement to make.
But let me explain.
The Times reported that foreign investors (non-residents) bank deposits on the pound rose to almost £100 billion pounds.
This is close to the £117 billion record in 2008.
When that happened, the Sterling crashed 25%.
The fear is, history may repeat itself.
Since 2019, we've seen the pound against the US dollar rise from $1.25 to $1.40.
With all the buying of the currency, it could create a bubble and investors could soon start to panic, and reverse their positions.
If this happens, there'll be a ton of selling and short selling. And this will cause the pound to crash.
So why would the FTSE stocks rally with a falling pound?
A weaker pound makes companies who earn profits in other currencies more attractive.
For instance, a large proportion of FTSE100 companies profits is made in dollars.
And so when the pound weakens, dollar revenues, once converted back into pounds, are worth more.
This means, we can expect more buying on the FTSE, which will push up the stocks and index with it.
But now the main reason, I am buying the FTSE 100 index is because of what the chart is showing me.
This W Formation is showing an upcoming rally!
In the daily FTSE 100 chart, you can see since January 2021, it’s formed a large breakout pattern known as the W Formation (Shaded area).
A W formation is a price pattern that resembles the letter W with two rounding bottoms with a high and low price between.
With this W Formation – the low price is at 6,314 and the high price is at 6,749.
Last week, we saw the price break up and out of the high level at 6,749.
And now, I’m basing my next price target on this larger W Formation which you can see in the above chart.
In fact, this tells me that the buyers (bulls) are going to soon go on a spree and drive the price up…
To calculate my first price target, we’ll use the High-Low formula.
This formula finds the price difference between the high and low price of the W Formation and is then added to the high.
Which in this case is:
Price target = (High price - Low price) + High price
= (6,749 - 6,314) + 6,749
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Here’s how we’ll profit from the 435 point rally
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 7,184.
I can follow Pickpocket Trader’s
service where Trader X will send out buying trade ideas on UK stocks.
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Analyst, Red Hot Storm Trader