FTSE 100: Potentially developing a bullish island reversal
UK’s consumer price index (CPI) fell to 2.4% year-on-year in September, comparing to the 2.7% registered in the previous month and coming up short analysts’ estimates of 2.6%. It is the lowest data in three months, mainly driven by a slowdown in the cost of food, transport, recreation, and culture plus a fall in clothing prices. Nonetheless, it remains above the Bank of England (BoE) target of 2%.
Since the beginning of October, the main UK index FTSE 100 lost over 6.5% and is in a bearish phase since mid-October after the death cross.
On yesterday session, the FTSE 100 tried to rise but found enough resistance near the 7,034.0 to reverse and closed near the low of the day, in addition, managed to close shy below Wednesday low, which suggests a strong bearish momentum.
The stochastic is showing lack of momentum although is crossing above the 50 midline.
Theresa May’s admitted yesterday in Brussels that the UK could stay tied to the EU rules and laws beyond December 2020 in an attempt to solve the Irish border issue. In addition, the EU Commission President Juncker is convinced they will find a deal with the UK, adding, that a Brexit deal will be done and a longer transition period probably will happen.
All these political negotiations are fuelling the bears and keeping the bulls retrained as the price gaze the year-to-date low at 6,765.5. However, the UK index maybe developing a bullish island reversal the only thing missing is for the bulls take the reins and push the price dramatically higher, creating a gap up.
UK100 is a CFD written over FTSE100 futures.
UK100 Dec ’18 H1 Candlestick Chart
Written by Hugo O’Neill, External Analyst
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