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Italian stocks rally on hopes of political breakthrough

Summary:

  • Global stocks trading firmly higher 
  • Italian market reacts positively after hopeful comments on coalition talks
  • ITA40 close to 1-month high

It’s been a good day so far for stock market bulls so far, with indices around the globe rallying as geopolitical tensions ease a little. One of the best performers is the ITA40 which has received an additional boost from a potential breakthrough in the political gridlock seen in Italy since last month’s election. 

On the eve of a second round of coalition talks, the leaders of Italy’s two leading political parties said they would work towards establishing a functioning government as soon as possible. According to reports, a telephone call yesterday between Luigi Di Maio, leader of the anti-establishment Five Star Movement (M5S) and the head of the nationalist League party’s Matteo Salvini was productive. The two said they had agreed on a chair for the special committee of Italy’s lower house, "in a spirit of cooperation to get parliament operational as soon as possible". 

A second round of talks began this morning between Italy’s main political parties and President Sergio Mattarella, after the initial discussions failed to yield sufficient progress and end the deadlock from March’s inconclusive election. 

Looking at the charts, the ITA40 has now moved up towards the higher reaches of its recent range today. The market has surged strongly higher in recent weeks after holding the lows around 21300 at the end of last month and price now trades some 500 points higher. 

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 ITA40 has added to its recent gains today and is higher by around 500 points in recent weeks. Source: xStation

Turning our attention to a daily timeframe, we can see that the support around 21300 was crucially held on both the last decline and the one following the unexpected election outcome at the beginning of March. Bulls will now be looking to push the market above 23088 and if they can they will gain hope that a retest of 2018 highs of 24030 may occur. However, it should be noted that a possible long term head and shoulders reversal formation could be forming with 21300 a potential neckline. 

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 The ITA40 is back near the top of its recent range and threatening to move above the 23000 level. Source: xStation

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