The FTSE100 surged to its highest trading level trading level since the March 2020 market crash, as oil giants BP and Royal Dutch Shell lifted the leading UK index over 200 points higher from its daily opening price on Wednesday.
News that Saudi Arabia will be imposing output cuts sent the value of Brent Crude Oil over 5 percent, and lifted oil companies inside the FTSE100. It should be noted that over half of the currently weekly gain in the UK100 come from BP and Royal Dutch Shell, hence the index is not as strong as it appears.
Fears over COVID-19 infections, and the newly imposed UK lockdown, probably until at least March this year, has naturally soured the mood for a number of key stocks inside the FTSE100. Downbeat service PMI data from the United Kingdom also did little to help hospitality and retail sector stocks.
Furthermore, bad vibes are coming from the US stock market at the moment, following the heavily negative ADP private sector jobs report, and concerns about fiscal spending after the Democrat party gained control of the US senate.
One could speculate that traders may see more value in UK companies at the moment, due to the fact that some US companies are overvalued, and the with the current unstable US political situation, some of the top companies may appear more expensive.
Still, from a technical perspective the FTSE100 look very bullish at the moment, and could well be headed towards the 7,000 level, and possible even the 7,400 level if the bullish momentum in the index continues.
FTSE100 Technical Analysis
The lower time frames show that a head and shoulders pattern has been invalidated on the lower time frame, following the recent break above the 6,640 level.
Source by ActivTrader.
The size of the invalidated pattern suggests that a rally towards the 7,050 area may be forthcoming. It should be noted that the 0.786 Fibonacci retracement of the March 2020 low to the February 2020 high is also found at 7,050.
Higher time frame analysis shows that a major trendline breakout has taken place since price broke above the 6,670 level. The trendline breakout is significant and could signal a major trend shift for the FTSE100, with bull now likely to target the 7,400 level.
Royal Dutch Shell Technical Analysis
Royal Dutch Shell has incredibly bullish technical at the moment, both in the short-term and the long-term. The recent breakout rally above 1,400 has cemented the bullish outlook behind Royal Dutch Shell, and probably encouraged considerable new speculative money into the stock.
Source by ActivTrader.
The four-hour time frame currently shows that bulls have invalidated a head and shoulders pattern, placing the 1,600 level as a valid upside target while price holds above the 1,400-support area.
The weekly time frame is showing that stock is close to forming an extremely large bullish reversal pattern. Bulls now need to move price above the 1,550 level to confirm the pattern.
If the bullish scenario takes place, then Royal Dutch Shell could be headed towards the 2,000 level over the medium to long-term.