The FTSE 100 struggled for direction as investors reacted to news that the government was planning to extend the lockdown for three more weeks. The index also struggled because of the pressure in the oil market.
St. James’s Place, a wealth manager, was the biggest laggard in the index, falling by more than 4%. It was followed by Ocado, Reckitt Benckiser, and Imperial Brands which dropped by more than 3%. British Petroleum (BP) dropped by more than 1%. The index performance lagged other European bourses like DAX, CAC 40, and FTSE MIB, which rose by more than 1%.
In a report by Bloomberg, the government is expected to extend the lockdown that was started three weeks ago by another three weeks. This will greatly affect the country’s ailing economy. The government is doing this at a time when the number of coronavirus cases is rising. The country has so far lost more than 12,000 people and the number is rising.
Meanwhile, oil prices have also affected the FTSE 100 because energy companies form about 15% of the index. As I reported earlier, oil prices are languishing close to a 20-year low as investors continue raising concerns about supply and demand.
Looking at the daily chart, the FTSE 100 index has found some resistance at the £5,865, which is around the 38.6% Fibonacci Retracement level.
This Fibonacci is drawn by connecting the highest and lowest levels this year.
The index also appears to be forming a head and shoulder pattern, with the April low being the neckline. Therefore, I expect the index to retest the lowest level in April at £5,335 before resuming the upward trend. This level is also slightly below the 23.6% retracement level.