Although the BEL 20 confirms my case for higher equity prices generally, the short-term upside returns appear no better than those available from the German or UK indices. A resistance band defined as 2842-2905 lies ahead, allowing for upside potential of between 3-5% before this resistance plays its hand. Traders will be able to take advantage of this likely upside, but holders of Belgian shares should prepare to take some profit.
The sharp rally that followed the major low in 2009 was similar in percentage terms to that of other leading global share markets. Following that initial rally, however, the BEL20 spent the next three years trading either side of its important G1 level of 2380. This centre-of-gravity provided strong support for the first two years of this three-year period, before a break below 2380 in August 2011 saw this reverse to become major resistance. It was not until November 2012 that a definitive break above the G1 gained real traction, propelling the index to isolated resistance around 2712. A doubling of the 25% advance from the November 2011 low (to one of 50%) takes the index to its next line of resistance and my minimum target of 2842.
A positive outcome for future gains in the BEL20 index would be a lengthy period of sideways trade around the band 2842-2905. Much of this depends on the performance of two stocks in the index however, GDF Suez and Anheuser-Busch In Bev. Together these two companies account for a 25% index weighting.
Recommendation: Buy or stay long. Take profit at 2842. Stop-losses can be activated on a break below 2600.