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The FTSE 100 has risen to its highest trading level since February 2020, after breaking above a huge triangle pattern on the higher time frames, further underpinning technical buying.
Yesterday, UK stocks again alongside global stock indexes as investors were relieved that Federal Reserve Chair Jerome Powell’s testimony to Congress did not include any major surprises.
United States Federal Reserve Chair Jerome Powell basically said that the United States economy can withstand QE tightening and Omicron, setting expectations of growth during a period of a withdrawal of stimulus.
On price action alone, the UK100 has been incredibly strong, and arguably looking much more bullish that CAC40 or even the DAX40, as selling interest in dips has been very muted.
Most traders are going to be on standby for the US inflation report today, which threatens to send tremors through financial market if a much-strong headline number is announced.
For me, we need to pay close attention to the top of the triangle, close to the 7,500 area, which is really a pivotal level for the medium-term direction of the leading UK index.
Sentiment towards the UK100 is starting to turn heavily negative, which is a good sign for buyers. According to the ActivTrader platform some 89 percent of traders are bearish towards the UK100.
This is a big increase in bearish sentiment since last week, which is worrying. Ideally we need to see bullish sentiment in order for a big correction to take hold. It looks like the breakout could be genuine.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 has ignited a large, inverted head and shoulders pattern. These types of patterns are typically extremely bullish.
Looking at the inverted head and shoulders pattern, a rally towards the 7,700 level is coming. Additionally, a head and shoulders pattern with a 100-point projection has been invalidated.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 has broken above a large triangle pattern. The break above the triangle is likely to see the index moving significantly higher.
It should be noted that the top of the top of triangle pattern sits around the 7,500 level. If the breakout from the top of the channel holds then a massive price rally could take hold. The same is also true if we see a big rejection.
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