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The FTSE 100 closed in the red on Thursday, as strength in the British Pound weighed on the leading UK index. Equity traders chose to strike a cautious tone towards a potential Brexit deal over the coming days, and the promise of another US stimulus package before Christmas.
While the FTSE 100 is likely to move higher if a Brexit deal is agreed upon over the coming days, we should not underestimate the strong inverse correlation the FTSE 100 has with the British Pound at the moment. Should we see sterling racing towards the 1.4000 handle on the announcement of a Breixt deal this coming weekend, it may impede the upside in the FTSE 100, as sterling at 1.4000 will creates some new challenges for FTSE 100 companies.
Alteratively, if we fail to see a Brexit deal agreed, then the FTSE 100 is also exposed to downside risks, even if the British pound depreciates significantly. UK companies are likely to turn down heavily in the red on Monday in this scenario, as traders and investors asses the damage that a Brexit no-deal, and decipher where to pick up UK stocks at bargain levels.
With that said, let’s take a look at the FTSE 100 and some of the leaders inside the index ahead of the UK and European Union’s last-ditch attempt to sign a Brexit deal this weekend.
FTSE 100 Technical Analysis
The technical are fairly clear for the FTSE 100 at the moment. The four-hour time frame shows that the FTSE 100 has run into major trendline resistance above the 6,600 level. Repeated rejection before the 6,600 level and the index is at serious risk of taking a tumble towards the 6,400 level.
If the FTSE 100 starts to trade below the 6,400 level, sellers are likely to target the 6,310 and 6,170 levels. To the upside, a sustained break above the 6,600 level should see bulls testing towards the 6,640 level once again. If a breakout above the 6,640 levels occurs then the FTSE 100 could move into a new, and higher trading range, between the 6,640 and 6,750 levels.
Source by ActivTrader.
HSBC UK
HSBC has seen a strong boost since October, although the heavyweight banking stock looks like it may be about to pullback before it heads higher. According to short-term technical analysis HSBC is trading around the neckline of head and shoulders pattern, and could be set for a big drop over the coming weeks.
The four-hour chart shows that continued weakness below the neckline of the mentioned bearish pattern, around the 395 level, could cause a drop towards the 365 level. Dip-buyers may be lurking around this area, although a major risk-off event like a Brexit no-deal could cause a steeper drop towards the 320 level.
Source by ActivTrader.
GlaxoSmithKline Technical Analysis
GSK has been on a wild ride since the news broke about the poor performance in the company’s COVID-19 vaccine. The charts are showing that the pharmaceutical giant’s share price may be setting up for further losses.
Watch out for sustained weakness below the 1,368 level to increase technical selling. A notable price gap also exists on the charts, around the 1,310 level, and could become a valid bearish target if we see the 1,350 support level breached. Bulls need to stabilize the stock above the 1,380 level to encourage bulls to test back towards the 1,400 level.
Source by ActivTrader.
Royal Dutch Shell Technical Analysis
Royal Dutch Shell is one of the top stocks in the FTSE 100, and has be a major contributor to the strength in the index over recent weeks. The recent recovery in oil price, and prospect of more economic stimulus has sent Royal Dutch Shell back above the 15.00 level.
Lower and higher time frame analysis is extremely bullish, and highlights that an extremely large bullish reversal pattern appears to be forming. The H4 chart shows that a coming breakout above the 16.00 level should propel Royal Dutch Shell’s price towards the 17.90 to 18.00 area.
Source by ActivTrader.
