My initial buy recommendation in July, at a level of 2909, set a target price of 3140, although a follow-up note in August suggested the index may probe the top of this range. Last week saw the index spike on opening to a peak of 3222, triggering my ‘take profit’ recommendation. With an index-beating rise of 8% now booked, we can revert to a neutral stance.
In last month's follow-up note I commented on the record-breaking June-end quarter announced in Britain's export figures, a trend that was fundamental to the prospects of the component companies of the industrial transportation sector. These positive fundamentals have continued since, as evidenced by last week's upward adjustments to both the UK and US second-quarter GDP. Furthermore, the Markit eurozone composite output PMI (purchasing managers index) signalled its largest monthly increase in business activity for over two years in August, while the Markit flash US manufacturing PMI showed the strongest improvement in manufacturing conditions in five months.
Despite the UK industrial transportation index having achieved my short-term technical targets, such improving momentum in global trade suggests the next trigger might again be an upside breakout.
Recommendation: neutral. Buy again on any fall to 2870.