The FTSE 100 has started to move sharply lower alongside other global equity markets due to sudden fears over the “Nu” variant that has come from South Africa. The UK government will be giving a press conference on the new variant later today.
So far, with the ‘Nu’ variant, the science suggests that it is very much a different strain with many more mutations unaccounted for. There are still scant details regarding this strain, but as more news come expect volatility in equity markets.
But the worst-case scenario would be for the variant to be fight-off vaccines and set back all the progress made over the past year or so that many nations have put in place combating the pandemic.
However, an upcase scenario or best-case scenario would be that this new strain simply fizzles out and vaccines are still able to defeat this variant from spreading globally.
Back to the FTSE100, panic and hysteria is winning the end of week trade for now and that is evident across UK stock markets today. Traders do need to consider that this could be a dip-buying scenario.
A move under the 7,000 level would make the FTSE100 look attractive, and a bearish head and shoulders pattern does suggest that the leading UK index does have the potential for further substantial losses.
Due to Thanksgiving holiday, thin liquidity is exaggerating the market move, and with the USA scrambling to cover longs, more price volatility could be expected today and at the start of next week.
Sentiment towards the UK100 is also in favour of more losses as traders remain overwhelmingly bullish. According to the ActivTrader platform some 84 percent of traders are bullish towards the UK100.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 ignited head and shoulders pattern after sellers were able to break through the 7,200-support level during the Asian session.
It should be noted that this pattern holds a massive 300 points of downside potential, which would take the FTSE100 towards the 8,900-support area. This means more downsides could probably be expected as the target of the pattern has not yet been reached.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the UK100 remains trading inside a large rising price channel, with the price now close to the middle of the pattern at current trading levels.
A move towards the 6,800 level could be on the horizon medium-term if bears can hold the price below the 7,200 area during this latest decline. A trendline test could be a huge buying opportunity.
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