Trading Ideas

June 17, 2011 4:59 pm

Retail sector to remain weak

I said on May 28 that the FTSE 350 General Retail sector was at risk from renewed weakness on the high street – noting how the sector’s price was hesitating at a level that had halted its progress repeatedly over the past 18 months. As I suspected, the sector then reversed sharply, dropping from 1832 to 1662. I continue to foresee weakness here, and reiterate my targets at 1520 and 1465.

In line with my prediction of April 15, the pound has continued to weaken against the Swiss franc. Having commanded SFr1.48 back then, sterling has slumped to a new low of SFr1.362. My targets of SFr1.34 and SFr1.30 are now within reach. However, the pound is currently oversold, so a rally to the 21-week exponential moving average (currently SFr1.449) might happen first. I would use such a move to go short.

I am not convinced that the bull market in US stocks is yet over, despite the current weakness. I wrote on March 19 that the Dow Jones – then 11859 – would make new highs above 12391. The index peaked in May at 12876. While I believe that US is destined for another 50 per cent collapse, the charts do not suggest that this is under way yet. I am seeking to go long once today’s correction ends.

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