Pullback In Key U.K. Stock Index Provides New Buying Opportunity

From Dana Lyons: The UK’s FTSE-100 dropped to once again test the level of last year’s breakout to all-time high.

There was no shortage of breakouts among global equity markets in 2016. Perhaps the most monumental, however, was that of the UK’s FTSE-100. Following a 15-year triple top between 1999 and 2014, and a false breakout in 2015, the UK’s benchmark index finally managed a seemingly successful breakout to new all-time highs, as we noted in a post at the end of 2016. After about a 3.5% pop to start the year, the FTSE returned to test the level of its breakout, around 7100, near the end of January, as we indicated to investors at the time. Or, as we put it, the FTSE appeared to be giving investors another chance to “”board the FTSE bus” prior to an ultimate run higher. Indeed, the test proved successful and the FTSE subsequently took investors along for a ride, to the tune of 5% into mid-March.

It appeared as though the bus had left the station and those investors who had failed to jump aboard at the end of January had likely missed the bus completely. However, last week, following the snap election news out of the UK, the FTSE bus once again returned to the spot of its breakout, giving investors one more chance to hop aboard. However, they needed to hop on quickly as the FTSE has already sped out of the station as if driven by one of those belligerently impatient bus drivers. Specifically, the FTSE popped higher yesterday, gaining more than 2%.

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So what next? Well, if it is another successful breakout test, there should be a lot more legs to this rally, i.e., investors who failed to “board the bus” previously can still get on at the next stop without missing too much. However, it is always nice to pick one’s optimal bus stop – you just have to be ready for the bus.

 

The iShares MSCI United Kingdom ETF (NYSE:EWU) was unchanged in premarket trading Tuesday. Year-to-date, EWU has gained 7.53%, versus a 6.10% rise in the benchmark S&P 500 index during the same period.

EWU currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #7 of 91 ETFs in the European Equities ETFs category.


Were you ready for the FTSE bus when it stopped last week? At The Lyons Share, we’ve been highlighting this potential setup for members for the past week. Check out this Premium TLS Post at our new “all-access” site for ideas on how to take advantage of this development in UK stocks. And don’t miss the bus – sign up for The Lyons Share!

Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.

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