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Market Analysis || 20-12-19

The FTSE 100 has had probably the best week in nearly 4 months as it surged beyond the 7584 price level; the highest it has been since the end of July. This is coming from optimism of the new Brexit plan that was outlined by the UK PM Boris Johnson and the Queen of England.

Following the election victory of the Conservative party and their assumption of the majority in the House of Commons, the party leader and UK Prime Minister Boris Johnson indicated via his spokesman that he would be introducing an amendment to the Brexit Withdrawal Agreement. This amendment would seek to block any extensions of the Brexit negotiations and final exit beyond December 2020.

This stirred up massive gains for the FTSE 100, which also benefitted from a spillover effect from the election victory of the Conservative Party.

The top gainers for the week are led by Scottish Mortgage Investment Trust, which is currently up by 8.03%. Other top gainers on the FTSE 100 include:

  1. British American Tobacco (7.52%)
  2. AstraZeneca (7.39%)
  3. Evraz (7.37%)
  4. Rentokil Initial (7.19%)
  5. Johnson Matthey (6.35%)
  6. Intertek Group (5.77%)
  7. Glencore (5.73%)

 

The biggest loser on the FTSE 100 this week is fertility treatment provider NMC Health, which saw a massive 46.22% shed off its stock price this week after a damning report by Muddy Waters, a short-selling research group. This group released a report on Dec 17 in which it claimed to have “serious doubts” about the financial position of NMC Health. The report even went as far as suggesting that the cash balances of the company appeared “too good to be true” when compared to its peers in the same business. The report triggered a massive selloff as panicked investors dumped the stock in droves.

Other top losers on the FTSE 100 this week include:

  1. Persimmon (-5.93%)
  2. Pearson (-5.23%)
  3. Land Securities Group (-4.69%)
  4. Unilever (-4.32%)
  5. Royal Bank of Scotland Group (-3.02%)

Technical Outlook for FTSE 100

This week’s surge on the FTSE 100 has given the weekly chart of the UK top index a new look. Spurred on by the bullish end to the previous week, the FTSE 100’s weekly candle has broken through the 7527.7 resistance line, and barring any last-minute selloffs before the weekend, looks good to have exceeded the 3% penetration close threshold to confirm the upside break.

Price is now testing the minor resistance at 7587.0 (previous highs of May 29, 2017 and July 22, 2019). We also see a cluster of previous weekly lows between May and August 2018 at this price level, which will act in role reversal to attempt to resist further upside.

 

 

 

 

 

 

 

 

 

 

 

FTSE 100 Weekly Chart: December 20, 2019

Further resistance on the weekly chart can be seen at 7731.2 (previous weekly highs of Jan 8 2018 and July 29, 2019 as well as a cluster of highs seen June and August 2018). There is also a resistance level at 7884.2 (previous high of May 21, 2018). At this level, price may interact with the channel’s upper border.

Some of the broken price levels will now function in role reversal as previous resistance-turned-support levels. These are at 7527.7 (previous weekly candle highs of March 18, May 6, 13 and 20) and further below, we also have 7246.4 and 7127.2.

The daily chart shows the price levels of support and resistance more clearly. This is the chart on which traders of the FTSE 100 can trade on.

 

 

 

 

 

 

 

 

 

 

 

FTSE 100 Daily Chart: December 20, 2019

There must be two successive daily candle closes above the 7587 resistance line, or a 3% penetration close above this price by the weekly candle to confirm further continuation towards 7731.2. This move would also confirm the breakout above 7527.7. Above this level, further resistance will be seen at 7884.2 (May 21 2018 high), which is also where the channel’s return line could come under challenge.

On the flip side, a price rejection at the present price level opens the door for a pullback move towards 7527.7. Below this area, 7420.2 comes into focus once again.

Bulls

Bulls need to see an upside break of 7585.8 for further advance towards 7731.2.

Bears

Bears would now have to hope for price to breakdown at current levels, which leads to a retest of 7527.7. A breakdown of 7527.7 is what could lead to a major move down to 7420.2, with 7246.4 and 7127.2 being the new support targets below this level.

Prices to watch: 7585.8 (bulls) and 7527.7 (bears).

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.


Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

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