Technical Analysis – UK100 stock index holds onto bullish bias but is losing momentum


Christina Parthenidou, XM Investment Research Desk

UK100 stock index has been mostly on the sidelines so far this month, bouncing back and forth between the 38.2% and 50% Fibonacci retracement levels of the downleg from 7,729 to 7,018. Interestingly, though, the price continues to keep intact the rebound from the 6-month low of 7,018 while holding above the Ichimoku cloud.

The momentum indicators are currently suggesting that there is some upside pressure in store as the RSI is comfortably above its 50 neutral mark. Yet, the gradual improvement in the MACD indicates that this is rather weak.

A decisive rally above the 50% Fibonacci and last week’s peak of 7,374 could add more gains to the market, shifting resistance up to the 61.8% Fibonacci of 7,457. Higher, the 7,595-7,630 zone could keep the bulls busy before attention turns to the 7,728 top.

Alternatively, the bears would need to close significantly below the 38.2% Fibonacci of 7,290 and the bottom of the Ichimoku cloud to bring the 200-period simple moving average (SMA) currently around 7,232 into view. Further down, the 23.6% Fibonacci of 7,185 could next come in sight.

In the bigger picture, the bearish outlook has weakened and the index is ready to turn neutral. The increasing distance between the 50- and the 200-period SMAs that have recently posted a bullish cross raises the odds for an outlook upgrade.

Summarizing, the UK100 stock index is expected to face a bullish but weak bias in the short-term, while in the longer-term period, the market may see more improvement.