This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
This mid-cap index, comprising companies capitalised outside the FTSE 100, is arguably a better barometer of the state of the UK economy than the leading index. My last update on the FTSE 250 was in January 2013, and my targets of the time have long since been fulfilled.
In that update I suggested a target price of 14,304, a level where I expected resistance to emerge. In the event that resistance proved modest, and I have now deleted those percentage lines entirely from my updated chart. Instead, the index went on to fulfil an even higher target in a band defined as 15,435-15,470. At the core of this band is the line representing a 50% rise from the important low in June 2012. Last December, however, this resistance was definitively breached and the index rose quickly as a result.
The recent correction took the 250 back to this band. Importantly, support re-emerged at its very mid-point, and this same band can now be defined as the new support. New upside targets are now emerging too. The first – in a band defined as 16,687-16,772 – would double the initial 66.66% rise from the July 2009 low. The second target is at 17,193, at which point a 200% rise from the unique low in March 2009 would be complete.
My analysis of both the FTSE 100 and FTSE 250 indices sends a simple message: I expect UK mid-cap shares to generally outperform their larger peers throughout 2014.
Recommendation: buy the FTSE 250 index (as a CFD or via the Exchange Traded Fund). Target 16,687. Stop-losses can be activated on momentum below 15,435.