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The FTSE 100 has recovered sharply higher after dropping towards the 7,200 level earlier this week, which marked a 500-point drop from the highs of the year for the index.
Last week’s drop marked a new 2022 trading low for the index; however, dip buying has been very strong, which is not surprising given the relentless bid-tone that the index has seen for much of the year.
Looking at the price charts a large hammer candle is present after last week’s big price reversal, although I am not entirely convinced that the low is in for the index and would preference a final dip.
Many clues exist that the FTSE100 could stage another surprising drop, such as a key rising trendline that remains untested, alongside a large head and shoulders pattern that has yet to play out.
The UK100 is rich with commodity-related and mining companies, so it is somewhat protected when blue-chips plunge, given that commodity and gold prices are rising.
I expect that the 7,500 level will act as a major trading pivot, and even though the trend is still bullish, I preference that the UK100 will see 7,000 before it tests 7,700 once again.
Sentiment towards the UK100 is starting to neutralize. According to the ActivTrader platform over 53 percent of traders are bearish towards the UK100. This is a sign of more range bound trading ahead.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that another potential breakout is coming, due to the presence of a large head and shoulders pattern, which holds significant downside potential.
The prospect of buy a dip in the FTSE100 around the 7,000 level is highly probably, and it could be a major dip buying opportunity for UK stock bulls.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 is trading inside a massive rising price channel between the 7,000 and 8,500 price level.
It should be noted that dip-buyers are likely to be stacked around the 7,000 level in expectation of a major bounce back towards the top of the price channel.
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