FTSE Set to End the Week Marginally Higher in Muted Trading
The FTSE 100 index looks set to end the week marginally higher than last week’s close, as the coronavirus outbreak continues to weigh heavily on global markets. After weeks of containment, the global spread of the coronavirus seems to be on the rise. A so-called “superspreader”, who contracted the virus in a conference in Singapore, appears to have spread it to 11 people on his return to the UK through three countries. This made for sensational headlines in the UK within the week.
Investors are now shifting attention to the aftermath of the coronavirus outbreak and the impact it will have on the global economy. Apple was the first company to set off an earnings guidance warning, as it disclosed that lack of regular supplies from shuttered factories in China would impact its bottom lines.
Maersk has cancelled 50 trips since the Chinese New Year, and Jaguar is warning that it could run out of car parts in as little as a week. South Korean carmakers Hyundai and Kia have suspended production as difficulty in sourcing car parts increase. UK luxury brands such as Burberry and Imperial Brands continue to suffer drops in their share price.
Investors are fearing the worst and these fears are manifesting in the FTSE 100’s performance of late.
The daily chart for the FTSE 100 shows that long-term price action is captured within a significant symmetrical triangle, within which there are key price levels of support and resistance which have dictated price action in the last eight months.
The FTSE 100 index is currently trading at 7430.2, with the daily candle now testing the 7437.6 resistance. A break of this resistance requires a 3% penetration close above this price level on the weekly chart, or two successive candle closes on the daily chart. If these parameters are achieved, the FTSE 100 would be on its way to target the 7596.1 price level. Further upside above this area would put the FTSE 100 on the path to testing the triangle’s upper border. However, such upside moves must have a fundamental basis; either from a resolution of the coronavirus outbreak or the launching of stimulus packages to help UK companies ride the impact waves from the economic shocks the outbreak has caused.
Failure to break this resistance could open the door towards 7230.9, which is also where the lower border of the symmetrical triangle is located. 7311.6 (previous highs of 28 February, 24 September 2018 as well as 12 August and 4 December 2019 lows, all acting in role reversal) could be an intermediate support level.