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The FTSE 100 has bounced sharply higher after briefly dropping under the 7,000 level earlier this week and finding meaningful technical support from just above the 6,750 level.
Now could be a great time to speculate that a major multi-month price floor is in for the UK100. If we look at retail sentiment metrics, it is in fact still suggesting that a major floor is not yet in.
Sentiment towards the UK100 still looks overly bullish. According to the ActivTrader platform over 70 percent of traders are bullish towards the UK100. This is still a one-way trading skew.
However, 98 percent of traders were long the FTSE100 earlier this week, further underscoring traders desire to buy into a dip into the FTSE100, which has recently been on a tear until the Ukraine war.
Investors are faced with a real dilemma in terms of whether the UK100 will recovery from current levels, with the risk looming due to Ukraine that the UK100 will continues its freefall.
Technical analysis provides a compelling case that a meaningful price floor is in fact in. A large head and shoulders pattern has met its final downside target, plus the UK100 bounce from the bottom of a massive rising price channel.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that a meaningful price bottom may be in, due to the fact that a large head and shoulders pattern has finally met its overall downside target.
The prospect of buying a final a dip in the FTSE100 around the 7,000 to 6,900 support level is quite high this week. If last week’s low holds it could be a great time to start buying the FTSE100.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 has bounced from the bottom a rising price channel between the 6,850 and 8,500 price level.
It should be noted that dip-buyers are likely to be stacked around the 7,000 level in expectation of a major bounce back towards the top of the price channel this week. I remain hopeful.
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