The Goldilocks Scenario with FTSE 250 stocks

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It seems to be the case that many private investors are drawn towards AIM stocks, perhaps as much to do with the thrills and spills they offer as the returns they might bring. However, if we are rational, most of us would concede that the FTSE 250 is probably the area which has the best mix of growth versus relative safety.

A selection of Mid Caps as represented by the charts below will probably go a long way in terms of underlining this point. For instance, it can be seen that when a trend is established it tends to remain that much more robust than the equivalent in many so-called blue chips, if only on the basis that this area of the market tends to be less influenced by the geopolitical/macro concerns which can very often temper multi-national companies. And of course, there is the old cliche of elephants don’t gallop. Therefore very often we have a situation where for many of the constituents of the FTSE 250 we have something of a Goldilocks scenario for a decent percentage of the plays in this area of the market.

A good example of a strong trending play comes in the form of Ted Baker (TED). Here it can be seen how there has been progress with a rising trend channel from as long ago as the end of July. But the big breakthrough in the recent past has been the two day December bear trap rebound from below the 200 day moving average. This is currently running at 2,042p, well below where the stock is now. The view is that at least while there is no end of day close back below the 20 day moving average at the 2,562p/2014 uptrend line, the upside here for Ted Baker could still be significant. Indeed, we are looking at a top of channel target as high as 3,000p over the next 2-4 weeks. In the meantime any weakness back towards the initial March resistance at 2,691p can be regarded as a buying opportunity.

We follow Ted Baker with another ultra trending stock of the moment, Provident Financial Group (PFG). Here it is evident on the daily chart how since the November break to the upside we have seen an acceleration for the price action. Indeed, the way new support has come in at or above former resistance over the post autumn period indicates that Provident shares could still deliver further significant gains despite the moves already observed. The favoured scenario over the next 1-2 months would be a journey towards the top of the October rising trend channel at 2,950p. The stop loss on the buy argument is regarded as being an end of day close back below the 50 day moving average at 2,634p – also the 2014 uptrend line level.

It would appear that although the early life of Just Eat (JE.) on the stock market was dominated by hedge funds attempting to burst the bubble of enthusiasm surrounding this company. However, judging by the share price progress to date, they have not succeeded. The latest support zone is well above the 200 day moving average at 295p, and lies within a rising trend channel from October. All of this suggests that at least while above the 50 day moving average at 351p, one would expect further progress. The top of 2014 price channel target is seen as being 420p as soon as the end of April.

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