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FTSE stage set for breakout as UK approves vaccine

Fawad Razaqzada Fawad Razaqzada 02/12/2020
FTSE stage set for breakout as UK approves vaccine FTSE stage set for breakout as UK approves vaccine
FTSE stage set for breakout as UK approves vaccine Fawad Razaqzada
The big news this morning was once again from the vaccine front as UK became the first western country to approve a Covid-19 shot. While the reaction to the news was somewhat muted as the markets have already been pricing in an improved health outlook throughout November, this should help to keep UK stocks – especially those in the travel and hospitality sectors – supported, nonetheless. Critics will argue about vaccine’s safety and many people will be probably think twice before taking the shot. But ultimately, vaccine is our best hope to live in a Covid world, so I think a lot of people will slowly take the shot and life could return to normalcy by the middle of 2021.

The first 800,000 doses of the vaccine will be available in the UK from next week, according to Health Secretary Matt Hancock. Elderly people, especially those in care homes and staff working there are top of the priority list. Then, next in the line will be the over-80s and health and care staff. The working population will have to wait, but the UK government has already placed enough orders (40 million doses) to vaccinate around 20 million people.

Apart from vaccines, it is a struggle to look for fresh catalysts elsewhere. There is still no end in sight for the stalemate in Brexit talks. The same could be said about stimulus talks in the EU and US. Meanwhile, the virus is continuing to spread rapidly in the US, as well as large parts of Europe. The economic impact of the latest lockdowns could be severe, and the jobs that have been lost will be very slow to regain as many companies have gone bust – not least Debenhams, which failed to  secure last-ditch efforts to rescue the store chain.
 
Technical outlook

The FTSE has spent the last couple of weeks in a relatively tight range, digesting the recent macro events and taking a pause following the rally that started in early November. This bullish consolidation has allowed popular momentum indicators such as the Relative Strength Index (RSI) to work off their ‘overbought’ conditions through time than price action. This is potentially bullish as it indicates the sellers have been unable to cause much damage, while momentum-chasing investors who until now might have been on the side-lines, will now be encouraged by the RSI being no longer overbought.

Thus, the FTSE looks poised to break above resistance circa 6440 before potentially heading sharply higher.

FTSESource: ThinkMarkets and TradingView.com

Some of the bullish objectives include the Fibonacci retracement levels shown on the chart, at 6576 (61.8%) and 7063 (78.6%).

However, if instead of breaking out, the FTSE breaks down below 6245 support, then in that event we could see a deeper retracement, perhaps to the next key support down at 5950, before the index potentially resumes higher.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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