FTSE 250 finds new upside targets

Price at time of writing – 15,910.

In a departure from my usual weekly take on the FTSE 100, today I’m viewing the state of the UK share market via the FTSE 250 index.

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.

FTSE 250 chart

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