Italian stocks may rally 8 percent in the next two weeks after they held above a support line validating a so-called inverted head-and-shoulders pattern, according to a technical analyst at ING Groep NV.
The benchmark FTSE MIB Index bounced off a level on Feb. 7 that would have annulled the bullish reversal pattern, said Roelof-Jan van den Akker, senior technical analyst at ING in Amsterdam. That indicates the gauge will climb back to the Jan. 30 intraday high of 17,983.63, an 8 percent gain from yesterday’s close, before rallying further, he said.
“We will see a quick return to the 18,000 level,” Van den Akker said in a phone interview, adding that the gauge formed the inverted head-and-shoulders pattern with three consecutive troughs at the end of last year. “It may reach 19,000 in the first half of this year. What we would like to see now is the index closing above its 50-day moving average, further confirming this bullish trend.”
A rally to 19,000 represents a 14 percent advance from yesterday’s close of 16,644.45. The FTSE MIB rose 0.7 percent to 16,754.81 at 3:48 p.m. in Milan today, on course to end higher than the 50-day moving average of 16,735.65, data compiled by Bloomberg show.
Italian stocks surged 7.2 in January, before declining 4.6 percent this month though yesterday. Stocks fell as polls showed Silvio Berlusconi’s political party gained support before the country’s parliamentary elections on Feb. 24-25, fueling concern he may secure a fourth stint as prime minister and replace current premier Mario Monti.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
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