What’s Worse Than FTSE 100 Trading at its 4-Year Lows? There’s More Downside Potential

FTSE 100 is off to a bearish start in today’s European trading as risk aversion stemming from the coronavirus heavily weighed on sentiment. The UK’s stock index is down by over 2.30% at 5,736.6, which is also the lowest level that it has reached since March 2016!

Leading losses is tour operator company, Carnival, with a 9.89% loss. It is followed by Aveva Group at -9.34%. Although the company is in the IT industry, most of its clients are in the oil business. It has yet to recover from news of the oil price war which hit markets on Monday. In third place is Coca-Cola, down by 8.39, on news that Rockstar Energy will end its contract with the company. It has instead signed up with Coca-Cola’s rival, PepsiCo.

While the BOE’s rate cut yesterday helped FTSE 100 start the session on a bullish note, the index was not able to sustain it. Today looks like another day in the red for UK stocks. Concerns about the coronavirus are fueled even more by WHO’s declaration that it is now a pandemic.

Later today, it is expected that UK Prime Minister Boris Johnson will announce fiscal easing measures for the country. If US President Donald Trump’s press conference was any indication of market reaction, the FTSE 100 may not get much help from it.

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FTSE 100 Outlook

On the monthly time frame of FTSE 100 CFDs, we can see that the stock index is trading at its multi-year lows. If there are enough bargain-hunting investors at this price, it is possible for the stock index to find some support at this level. It could trade higher to 5,814.3 where it bottomed on January 2016.

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However, the 1-hour chart suggests more downside potential. A bearish flag has just formed characterized by FTSE 100’s consolidation after a sharp drop. If the index closes below today’s low at 5,463.2, it could be the start of a deeper sell off to 5,195.0.More content