Along with other equities markets, the FTSE 100 benefitted from risk appetite today. The UK’s stock index closed 158.5 points or 2.82% higher at 5,787.0. For the week, it is up by 1.6%. However, the technical setup on the 4-hour time frame suggests that it could face a sell-off soon.
Risk appetite was primarily boosted by positive developments on a coronavirus vaccine. The company Gilead announced that its drug, Remdisivir, did better than expected in trials. Consequently, it raised hopes that a cure may soon be available and that daily life and business activity would return to normal.
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On the 4-hour time frame, it can be seen that FTSE 100 CFDs is testing a confluence of resistance around 5,815.4. For one, this price corresponds to the highs of March 24 and April 7. It also aligns with the broken trend line that you get when connecting the lows of March 23 and April 3. Additionally, the recent reversal candles could hint that sellers may push price lower soon. Near-term support would be at 5,561.4 where the FTSE 100 bottomed yesterday and where the 100 SMA is. Should this happen, a head and shoulders pattern would be completed. This is a widely-considered bearish indicator and could hint at a bigger sell-off to the lows of March 23 at 4,805.6.
On the contrary, a close above today’s highs at 5,834.9 could mean that there are enough buyers in the FTSE 100 to push it higher. Near-term resistance is at 5,940.8 where the index topped on April 14.