On the back of a positive French election result and one of the strongest first quarter earnings seasons in recent memories, stock markets on both sides of the Atlantic have traded at multiyear and even record highs.

It’s easy to be put off investing by news of record highs. However, this report will look to ease some concerns by looking at several reasons why this could just be the start, rather than an end, of a stock market rally, as well as providing options for investors looking to profit from market moves in either direction for safe measure.

Why are we currently at all-time highs?

As mentioned above, the recent conclusion of the French Presidential election saw the market-preferred candidate Emmanuel Macron beat his anti-EU rival Marine Le Pen. Macron, a former banker and fervent supporter of the EU, is expected to bring about greater stability in the European bloc, fighting off a wave of populism in global markets. His victory helped push Germany’s DAX to a fresh all-time high as investors let off a collective sigh of relief on expectations that his premiership could see the economic area return to former glory.

Helping stock markets on both sides of the Atlantic is 2017’s record breaking Q1 earnings season, with companies bucking recent weak growth trends to beat expectations. In the US the figures speak for themselves as earnings per share growth reaches 13.3%, the first quarter of double digit growth since Q4 2011. This has helped the S&P 500 to trade above 2,400 points for the first time, alongside all-time highs for the Nasdaq.

What upcoming could influence markets?

The main event which could provide impetus for a further market rally – or even a potential reversal – is of course the upcoming general election on 8 June. Theresa May’s announcement of the snap election on 18 April saw Pound Sterling pop to its highest level in 6 months, although also contributed to the UK 100 ’s worst trading session since Brexit. However, should May’s Conservatives win a significant majority, many believe that the UK will have a stronger position to negotiate the terms of Brexit with the EU with much less anti-Brexit opposition.

Away from politics, markets keenly await the meeting of OPEC and non-OPEC members on 25 May to discuss extending to their 6-month production cut. The Energy sector holds the biggest weight on the UK Index , which could subsequently see any agreement between delegates having a profound impact on the UK’s blue chip index, whilst it may also lend a hand to other commodities to help the heavily weighted mining sector.

Finally, we keep a continued eye on Washington DC and President Donald Trump Markets are still awaiting updates on Tax Reform, Infrastructure Spending and Banking Sector Deregulation. Can ‘the Donald’ deliver on his promises or will his recent dismissal of the FBI chief backfire, creating a legislative backlog in Congress?

Over the page we outline a range of types of stocks that could present attractive trading opportunities, whether you are bullish or bearish on future prospects for stocks markets. Read on to find out more.

Below we highlight four distinct stock groups that could offer trading opportunities as global stock markets continue to trade around record highs. The groups vary from stocks trading at or near their all-time highs which could continue their impressive runs, to stocks down in the dumps that could be overdue a recovery.

Which UK stocks could build on record highs?

The top of the pack, the pick of the bunch; these UK 100 stocks have rocketed to trade all-time highs alongside US  and European counterparts, and look set to climb even further. While some of these stocks may not be household names, they have quietly been building on solid fundamental and technical positions to reach these highs. They might not be exciting household names, but they’ve thrilled their shareholders.

Companies such as Mondi, DCC, RELX and Croda are stocks rarely included in business news headlines, yet all have traded all-time highs in May 2017. Better known names on the list include Unilever following its takeover speculation inspired rally, whilst the London Stock Exchange Group may be exhibiting a bullish trading pattern.

Which UK stocks could be due a recovery?

This section highlights some stocks that have been on the backfoot as of late for a multitude of different reasons, however they may soon find themselves recovering from recent woes. These shares may be weaker as a result of an errant set of results or perhaps surprise one-off profits warnings as a result of company discrepancies.

There are two obvious candidates for this section, both being UK Index stalwarts that have suffered due to poor results and surprise profits warnings. Both BT and ITV have struggled of late following weaker than expected results, however the former’s move has been particularly noteworthy after trading a four year low in May.

What stocks have run their course and could be due a sell-off?

This group of stocks are also trading close to their record highs, however analysis of relevant market contributors – such as commodities or foreign exchange markets – alongside technical indicators suggest that their trends may be coming to an end. Having enjoyed a period of relevant strength, shares may now have reached a top.

Carnival (CCL) is a great example. The stock is within touching distance of its all-time highs, however it has recently retreated as its Relative Strength Indicator (RSI) recovers from overbought. The last time Carnival’s RSI went from overbought to oversold in late 2015 to early 2016, its share price dropped 25%. Could this be déjà vu?

Which stocks have consistently traded ranges?

These stocks may not be the most eye-catching, however these stocks have been trading in noticeable ranges over the recent period of market growth. While they may not be trading close to noticeable highs or lows, they have consistently seen trend changes at particular levels, often multiple times over the space of several weeks.

In recent weeks, Mining stocks such as Antofagasta have been limited to tight trading channels, however looking over the longer term, GlaxoSmithKline has repeatedly hit the limits of its narrowing pattern only to return again.

For a hand-picked selection of our top stocks from the lists above, complete with technical analysis and broker targets from the biggest names in the City, have a look over the page. Which stocks do you like the look of?

Rising Higher & Higher – Can these stocks build on record highs?

 1) Croda International (CRDA)

Will shares rally to 4000p (+1.5%) and above or pull back towards its pre-results level of 3650p (-7.5%)?

• Croda is currently trading at all-time highs, with its uptrend accelerated after well-received Q1 results
• Half of brokers have ‘buy’ rating on CRDA, while only a tenth say ‘sell’
• Relative Strength Index (RSI) and Stochastics turned overbought
• Directional Indicators continue to diverge bullishly

Broker Consensus: 50% Buy, 40% Hold, 10% Sell

Bullish: MainFirst Bank, Outperform, Target 4200p, +6.5% (26 April)

Average Target: 3768p, -4.5% (12 May)

Bearish: Credit Suisse, Underperform, Target 3350p, -15% (26 April)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

2) London Stock Exchange Group (LSE)

Will shares complete bullish flag to 3700p (+7.4%) or pull back towards March lows of 3000p (-13%)?

• LSE shares currently trading all-time highs, with bullish flag pattern to 3700p emerging
• One of the few UK 100 stocks with zero ‘Sell’ ratings
• Relative Strength Index (RSI) and Stochastics turned overbought with rising lows support
• Directional Indicators continue to diverge bullishly

Broker Consensus: 67% Buy, 33% Hold, 0% Sell

Bullish: Morgan Stanley, Overweight, Target 3825p, +11% (26 Apr)

Average Target: 3475p, +0.9% (5 May)

Bearish: Numis, Hold, Target 2800p, -19% (26 Apr)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

Up Off The Floor – Will these stocks prove to be recovery plays?

1) BT (BT.A)

Will shares rally to 2017 highs of 400p (+31%) or pull back towards 2013 lows of 260p (-15%)?

• Shares have fallen to 4-year lows after Italian accounting scandal and FY results
• However, brokers remain bullish and support at 300p could provide base for rally
• Stochastics recovered from oversold
• Directional Indicators remain bearish

Broker Consensus: 54% Buy, 38% Hold, 8% Sell

Bullish: Barclays, Overweight, Target 450p, +47% (12 May)

Average Target: 363p, +19% (12 May)

Bearish: CM Research, Sell, Target 247p, -19% (13 Feb)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

2) ITV (ITV)

Will shares rally to 2017 highs of 220p (+15%) or pull back towards Brexit lows of 140p (-27%)?

• Shares fell following dividend payment, exacerbated by poorly received Q1 results
• Brokers are predominantly bullish on the stock, with only 15% of brokers seeing downside to current price
• Relative Strength Index (RSI) and Stochastics turned oversold
• Directional Indicators diverging bearishly

Broker Consensus: 54% Buy, 33% Hold, 13% Sell

Bullish: Liberum, Buy, Target 340p, +78% (8 May)

Average Target: 227p, +19% (12 May)

Bearish: Societe Generale, Sell, Target 155p, -19% (11 May)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

Time To Cool Off – Have these rallying stocks run their course?

 1) Carnival (CCL)

Will shares rally to all-time highs of 4870p (+2.7%) or pull back towards 2017 lows of 3870p (-18%)?

• Carnival shares falling back from early May’s all-time highs
• However, brokers remain bullish on shares’ future prospects
• Relative Strength Index (RSI) recovered from first significantly overbought reading since end-2015
• Directional Indicators converging bearishly

Broker Consensus: 61% Buy, 31% Hold, 8% Sell

Bullish: Bernstein, Outperform, Target 5698p, +20% (9 May)

Average Target: 5075p, +7.0% (12 May)

Bearish: Berenberg, Hold, Target 4300p, -15% (24 Mar)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

2) International Consolidated Airlines (IAG)

Will shares rally to 2017 highs of 620p (+2.9%) or pull back towards 2017 lows of 460p (-24%)?

• Shares retreating from early May’s 18-month highs
• Recent broker updates, however, suggest upside to shares’ current price
• Relative Strength Index (RSI) recovered from overbought
• Directional Indicators converging bearishly

Broker Consensus: 61% Buy, 33% Hold, 6% Sell

Bullish: Goodbody, Buy, Target 860p, +43% (10 April)

Average Target: 619p, +2.8% (12 May)

Bearish: HSBC, Reduce, Target 490p, -19% (2 Mar)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

Rangebound – Stocks with repeating, ranging patterns

1) GlaxoSmithKline (GSK)

Will shares rally to October highs of 1735p (+4.8%) or pull back towards 2017 lows of 1450p (-12%)?

• GSK shares approaching ceiling of narrowing trading channel at 1680p
• Majority of brokers maintain ‘Hold’ rating, suggesting no breakout or breakdown from current channel expected
• Stochastics turned sharply overbought
• Directional Indicators diverging bullishly

Broker Consensus: 39% Buy, 55% Hold, 6% Sell

Bullish: Oddo & Cie, Buy, Target 2200p, +33% (13 April)

Average Target: 1772p, +7.1% (12 May)

Bearish: Societe Generale, Sell, Target 1300p, -21% (27 Mar)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

2) Vodafone (VOD)

Will shares rally to September highs of 240p (+13%) or pull back towards December lows of 190p (-10%)?

• Vodafone shares have consistently traded in narrowing pattern since end-2017
• Recent broker updates are mixed, although majority suggest upside to current price levels
• Stochastics turned sharply overbought
• Directional Indicators diverging bullishly

Broker Consensus: 52% Buy, 38% Hold, 10% Sell

Bullish: JP Morgan, Overweight, Target 280p, +33% (12 Apr)

Average Target: 211p, +/-0% (12 May)

Bearish: Societe, Sell, Target 150p, -29% (6 Apr)

N.B. All pricing and consensus data was sourced from Bloomberg on 12 May. Please contact us for a full, up to date rundown.

Want to take advantage of the above opportunities right now?

Whether you see UK stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.

CFDs: Like shares, but more flexible

The example above shows how buying 1,450 shares in British Land @ £6.90 requires an outlay of around £10,000 plus commission (see left-hand box), while the same exposure via a CFD requires about £500 plus commission (see right-hand box). If a trader invests in British Land, one would assume they believe the share price is likely to move in their favour. After considering the ‘worst case scenario’ and assigning funds to cover it, the trader may conclude there’s little point in exposing the full £10,000 to the BLND shares - some of that capital could be put to good use elsewhere in the markets. (Source: IG, Prices indicative)

CFDs are leveraged instruments, but you don’t have to use the leverage

If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure. The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up just £500 (note that overnight financing costs will still apply). The remaining £9,500 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!

What’s your view?

Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios download our ‘Comprehensive Guide to CFDs’ here.

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