Here’s Why FTSE 100 Is Soaring After Falling for 3 Straight Days

The FTSE 100 is bouncing back after all its constituent companies turned red yesterday. It is up by 1.28%, making it one of the best-performing indices in Europe. The FTSE 250 has jumped by 0.45% while the FTSE all share index has soared by 1.20%.

UK stocks are rising at a challenging period for the United Kingdom. The number of Covid-19 infections is rising, and London, its biggest city is in a partial lockdown. Also, the government is winding-down its stimulus packages, including the popular furlough program.

The implication of rising cases, Brexit uncertainties and ballooning government debt mean that companies in the FTSE 100 will remain being under pressure for long. The companies most at risk are those in the hospitality industry like Intercontinental Hotels and Whitbread and those in the air travel industry like Rolls Royce Holdings and Melrose Industries.

However, on a positive side, auto sales in the UK have started rising and there is a likelihood that the UK and the EU will reach a deal before the end of the year. This is because it will be in the UK’s interest to keep its relationship with its biggest trading partner intact starting from 2021.

Indeed, a recent report said that the UK would lose more than $25 billion a year if it left without a deal. Boris Johnson had threatened to walk away from negotiations yesterday.

According to the automobile association, the country’s auto registrations rose by 276% in September as demand for private cars rose. The sales still fell by 4.4% on an annualised basis.

Rolls Royce share price is the best performer in the FTSE 100 today. It is up by more than 4%. Still, the shares are down by more than 40%. Other risers in the FTSE are Experian, Just Eat, Ocado, Burberry, and Avast. On the other hand, the only laggards are British Airways owner, IAG, Land Securities, BT Group, Lloyds Banking Group, and Barclays.

Rolls Royce leads FTSE gains

FTSE 100 index technical outlook

On the daily chart below, we see that the FTSE 100 formed what seems like a hammer pattern. As you will find in our free trading course, a hammer is usually a bearish reversal indicator. The index is also in the green for the first time in the past three days.

Interestingly, the index has been in a narrow descending equidistance channel that is shown in green. It has also moved below the 50% Fibonacci retracement level. Therefore, even with the bounce today, I expect that the index will remain in the current channel in the next foreseeable future.

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