The FTSE 100 has surged to a two-year high this week after the British Prime Minister held onto his job amidst a barrage of pressure and also Boris Johnson hinted all remaining Covid rules could be scrapped early.
The leading UK index and heavily blue-chip weighted index broke out yesterday to a new high, and gained 1.1 percent, to hit its highest level since January 2020 amid hopes an end to the pandemic could be in sight.
The British Prime Minister Boris Johnson basically said that he expected the last domestic rules, including the requirement to self-isolate following a positive test, which is to be ditched from February 21.
The FTSE was also driven higher by gains for travel and leisure stocks including British Airways parent company IAG, Premier Inn owner Whitbread and B&Q owner Kingfisher. Mining stocks also moved higher as gold prices climbed.
European and US tech stocks are also looking more bullish, I would not be surprised to see the 7,800-level become a realistic target this month for FTSE traders buying the index.
Sentiment towards the UK100 is starting to get one-sided. According to the ActivTrader platform over 89 percent of traders are bearish towards the UK100. This is an increase in bearish sentiment of some 30% this week.
With these type of sentiment skews, it does allude to the fact that retail is getting hurt being long, hence we could easily see a push towards the 7,800 level this month.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that a potential breakout is underway from an inverted head and shoulders pattern, following the recent breakout above the 7,630-resistance cluster,
The 7,630 level offers strong support on any moves lower and could set up the prospect of buy a dip in the FTSE100 if we see a big price rally or around the 8,000 zone, which is the patterns target.
UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 has broken above a trendline of extreme importance. Bulls now look to be targeting towards the 2020 for a confirmed breakout to new all-time high.
It should be noted that the top of the pattern sits around the 7,630 level. If the breakout holds then a massive move could be on the, or indeed a bullish break with at least 800 points of directional potential.