International investors have been keeping a close eye on the United Kingdom over the past week because, as of Jan. 31, 2020, it is no longer an official part of the European Union. The U.K. now shifts into the final transition phase of withdrawal, which lasts until Dec. 31 of this year, whereby the former member obeys EU laws while finalizing details on agreements related to topics such as trade. In this article, we'll take a look at several charts that will likely catch the attention of active traders over the weeks or months ahead.
iShares MSCI United Kingdom ETF (EWU)
Popular exchange-traded products such as the iShares MSCI United Kingdom ETF (EWU) will likely be the focus for many retail investors since it offers targeted exposure to the U.K. stock market. As you can see from the chart below, the strong start to 2020 has triggered a bullish crossover between the 50-day and 200-day moving averages. This common buy signal is known as the golden cross and is used by followers of technical analysis to mark the beginning of a major uptrend.
The breakout will likely be used by traders to confirm that the bulls are in control of the momentum and that prices are likely poised to move higher over the year ahead. The recent retracement toward the combined support of the dotted trendline and the 200-day moving average could also be used by traders as an opportunity to enter a position with a favorable risk/reward setup. Stop-loss orders will likely be placed below $31.62 in case selling pressure becomes stronger than many anticipate.
AstraZeneca Plc (AZN)
When it comes to U.K. health care companies, AstraZenca Plc (AZN) is one of the leaders. Over the past couple of decades, the stock has experienced a tremendous move higher, and based on the ascending channel pattern shown below, this theme doesn't look like it will end any time soon.
Range-bound traders will most likely look to buy as close to current levels as possible in anticipation of a move back toward the upper trendline or swing high near $52. From a risk-management perspective, stop-loss orders will most likely be placed below the lower trendline or the 200-day moving average (red line) depending on risk tolerance and investment horizon.
Vodafone Group Plc (VOD)
Vodafone Group Plc (VOD) was founded in 1984 with headquarters in Newbury, United Kingdom. As one of the major telecommunications services companies in Europe and internationally, Vodafone represents an interesting business that will be drastically affected by the outcomes of the Brexit transition phase.
As you can see from the chart, the price is trading within a period of consolidation known as a channel pattern. This range-bound nature could continue to dominate until trade details start to become known. Bullish investors will most likely want to buy into the stock as close to the 200-day moving average as possible and protect against market weakness by placing stop-loss orders several points below just in case of a shift in sentiment.
The Bottom Line
As the U.K. leaves the European Union and a new geopolitcial reality becomes known, investors from around the world will likely look to the charts of the U.K. for clues on where prices could be headed over weeks and months ahead.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.