The FTSE 100 continues to range trade between the 7,200 and 7,000 levels as the multi-month uptrend in the leading UK index starts to slow down during the summer months.
This week energy, housing, and mining stocks have been leading the gainers inside the FTSE100. Energy heavyweight, Royal Dutch Shell, which is one of the leaders in index sits close to a six-year high due to plans to boost shareholders returns and overall strength in oil prices over inflationary fears.
Miners have also had a strong week due to rising copper and iron ore prices. BHP, Rio Tinto and Antofagasta were some of the strongest mining companies, while housebuilder Redrow advanced after it announced that 2022 could see revenues of £2 billion.
Still, range-bound trading can clearly be seen on the technical front as the UK100 has seen its Average True Range decline to levels not seen since January 2020. The ATR is a classic measure of volatility.
As the FTSE100 remains bid but largely range-bound the major trading action has been taking place in the FTSE250 index, which hit its highest trading level since 2018 this week as takeover talks boosted optimism amongst FTSE250 traders.
UK supermarket Morrisons has been advancing sharply this month due to ongoing takeover bids. Just this week a large American company was reported to have offered over $9 billion for Morrisons.
Sentiment towards the UK100 is matching the current tight trading ranges, which remains largely even at this stage. According to the ActivTrader platform, some 55 percent of traders are bullish towards the UK100 right now, while 45 percent of traders are bearish.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 is struggling to advance, despite the index consistently testing towards the top of its yearly range.
The technical clearly show that a head and shoulders pattern had been invalidated, which really improved the short-term upside case for the FTSE100, however, follow through is lacking.
According to the overall size of the invalidated pattern a rally towards 7,500 could be on the horizon if the 7,200 level is overcome. It is very encouraging the way that any dips towards the 7,000 level are being bought.
UK100 Medium-Term Technical Analysis
The daily time frame show that the UK100 is struggling to gain traction inside a large rising price channel, while its Average True Range is crashing to multi-year lows.
It is also noteworthy that the FTSE100 will likely remain in range bound conditions intil we see the 7,000 to 7,200 range is broken. If we do see the range broken I would expect a rally towards 7,400 or a breakdown towards 6,800.