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The UK100 is approaching the best levels of February, as the recent attempt to take down a Saudi Arabian oil production facility over the weekend helped boost oil companies within the FTSE100. BP and SHELL, two of the largest components of the UK100 index received a major boost from the Saudi news.
Last week’s OPEC meeting also provided strong tailwinds for BP and SHELL, as oil prices surged to fresh multi-month and new 2021 trading highs after OPEC members agreed to keep the recent product cuts in place.
The reflation trade has also been bullish for blue-chip companies inside the FTSE100. The notion that the real economy is going to grow post COVID-19, coupled with rising inflation, has helped boost banking and retail stocks inside the FTSE100 higher.
A rotation away from technology stocks has also been beneficial for the FTSE100 and other European stocks, as traders sell the tech intensive stocks inside the major indexes in the United States, such as the Nasdaq and the S&P 500.
This is best highlighted by the Dow Jones Industrial Average, as the index continues to rally while the Nasdaq tanks. Traders rotate away from the tech darlings, such as Facebook and Amazon, which have performed so well over recent months, and into so-called reflation stocks.
Something else that is underpinning the bid tone in the FTSE100 at the moment is the major pullback in sterling over the last two weeks. The FTSE100 and sterling share an inverse correlation most of the time.
Should we see sterling continuing to correct lower over the coming weeks, as the price charts are suggesting, then we could see further gains in the UK100. If bulls can take out the February high, it will be a strong bullish statement.
UK100 Sentiment Analysis
The Market Sentiment indicator on the ActivTrader platform currently shows no strong trading bias at the moment. This could mean that a breakout is not nearing, and that range bound trading may persist.
Usually, when we see largely neutral sentiment readings on the ActivTrader Market Sentiment indicator it suggests range bound trading conditions ahead. We could see the FTSE100 trapped within the 6750 to 6650 price range over the next few days while neutral sentiment remains.
UK100 Technical Analysis
The four-hour time frame shows that the FTSE100 is approaching the February high. Bulls need to breach this key resistance zone to avoid a bearish triple-top forming.
If we see the FTSE100 can breach the February high, then the index could surge towards the current yearly high, just above the 6,950 level. Traders should note the short-term trend is bullish while price trades above the 6,600 level.
Source by ActivTrader.
Higher time frame analysis shows that a breakout has taken place from a symmetrical triangle pattern, although momentum is painfully slow above the triangle at the moment.
The bigger picture still shows the FTSE 100 trapped inside a large rising price channel. If bulls can clear the February and January highs, then expect lift-off in the FTSE 100 towards the 7,300 level.
Source by ActivTrader.
