Bottom line: FTSE seems to have hit a potential resistance around 5800/50 levels last week. Bears might be looking to take control from here and push towards 4700 mark. Resistance remains at 6888 going forward.
Fundamental Outlook:
The holiday shortened week ahead would continue to focus on Oil prices, Gold, and how long Equity Markets would rally, as they digest respective stimulus packages.
FTSE is expected to open the week amidst news of an extended lock down due to Corona pandemic. The UK could emerge as one of the worst affected countries by the COVID-19. The tone in FTSE is expected to be bearish, with immediate support seen around 5600. A break below would encourage bears to resume towards 4700, going forward.
WTI Crude prices rallied over 4% and reached 24.50 during early trading hours today. It is pulling back a bit and trading around 23.20 for now. Oil price outlook remains bullish as OPEC members reached an agreement to cut production by around 10 million barrels per day, going forward. The end of a price war between Russia and Saudi Arabia might send Oil prices higher towards 39.00 levels.
The number of affected cases in the U.S has now crossed over half a million at 560,433. The ongoing COVID-19 pandemic and dismal job numbers in the past 2-3 weeks will further add to the economic conditions over the next several months.
Technical Analysis:
FTSE had rallied over the past week and managed to hit 5850/60 levels by Friday close. The counter trend rally that began from 4760 lows earlier might be complete around 5850 levels. It might be considered safe to exit from long positions and prepare to reverse.
The recent drop between 6888 and 4750 has been retraced up to fibonacci 50% levels. A bearish reaction here could resume lower towards 4700 and further.
Most traders might be willing to initiate fresh short positions around 5850/5900 levels with protective stop above 6900 and projected targets below 4700 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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