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A rising Industrial Transportation index is often considered a good bellwether in measuring the health of the economy, and indeed the broader stock market. For the record, the Dow Jones Industrials index remains in rude health and on track to achieve my long-term target of 16,175.
In line with other leading share indices, the UK Industrial Transportation sector index established a unique low in early 2009, having hit its last line of support at the crucial G3 level (calculated as a decline of 75% from its all-time high). The index then rallied to meet standard resistance that follows a 100% advance, and duly entered a six-month period of consolidation (at a level just shy of its important G1 level). After breaking above this resistance in March 2010, the sector galloped ahead to its next band of resistance centred around 2650. This resistance contained the advance for the next two years.
In an important recent development, the sector index has broken above these containment lines, allowing a refreshed index to complete some minor upside targets. The main targets, however, lie in a band of resistance defined as 3138-3188. This 50-point band now becomes the new upside target, whereupon a 200% advance from the major low in 2009 will be completed.
This sector index is readily tradeable, and you can find it on our platform in the Indices section, under UK Sectors I-Z.
Recommendation: buy. Target 3140. Stop-losses can be set to trigger on any surprise weakness beneath 2650.