U.K. stocks will rally 12 percent if the benchmark FTSE 100 Index clears a resistance level that has held since February 2011, according to a technical analyst at Taler Asset Management.
If the gauge can breach the 6,100 level, the next level of resistance would be at 6,700, last reached in mid-2007. The measure rose 0.4 percent to 5,961.59 yesterday, its highest in nine months, amid optimism that U.S. lawmakers are making progress towards a budget agreement.
“The upside potential for the FTSE index is limited to that area of resistance between 5,900 to 6,100,” Julius de Kempenaer, a senior technical analyst at Taler Asset Management Ltd. in Gibraltar, wrote in an e-mail. “A break higher, preferably beyond the cluster of highs that was set in the beginning of 2011, would open up a lot of fresh upside potential that could take the FTSE back to the peak levels seen in 2007.”
While the index tested the 6,100 level in mid-2011, it failed to close above the resistance, de Kempenaer wrote. A decline below the recent November low of 5,600 would negate the bullish scenario, he wrote.
In technical analysis, investors and analysts study price graphs to predict changes in a security, commodity, currency or index.