The FTSE 100 is returning to levels last reached in mid-June this year, aided by a surge in mining companies after ex-FTSE 100 component BHP’s announcement of a 26% rise in profits to USD21.3 billion and a record dividend distribution. BHP stock is now trading 4% higher in London, at 2,326p per share. Oil majors also inched upward as the price of brent levelled off after Monday’s sell-off, while takeover fever was bolstered by the revelation that Ted Baker and the cyber-security company Darktrace were both potential acquisition targets. A proposal of 110 pence per share from ABG, equivalent to 210 million British pounds, is claimed to have been advised by Ted Baker, while the American private equity company Thoma Bravo is reportedly running the numbers on Darktrace.
Ted Baker (TED) shares are up 17% to 109p, while Darktrace (DARK) shares are up 21% to 502p.
The FTSE 100 reached a new high in early trading for the first time in two months, but it is having trouble moving much farther ahead. The rise up today was supported by encouraging data about the stock market, a weaker pound sterling in comparison to the US dollar, and news regarding employment and salaries in the UK that was somewhat better than anticipated.
Bears are beginning to wonder if the index has completed its intermediate-term mission due to the absence of any follow-through from the bulls. This perspective is receiving further support from a technical indicator known as a bearish candlestick. The appearance of a “hanging man candlestick” on the daily chart on Monday gives the impression that there is a good chance that the current gain will be reversed.
Daily price chart of the FTSE 100 index on August 16, 2022
Despite the fact that the hanging man candlestick may throw a negative shadow over the daily chart, the three simple moving averages are looking good, and there is still a short-term sequence of higher highs and higher lows in place. If the bulls are able to push the market higher for an extended period of time, the next target zone for the UK big board is located between 7,634 and 7,688.
According to the data collected from retail traders, 22.44% of traders are in a net long position, and the ratio of traders short to long positions is 3.46 to 1. The number of traders who are net long has increased by 9.19% since yesterday but has decreased by 9.44% since this time last week. On the other hand, the number of traders who are net short has decreased by 2.13% since yesterday but has increased by 5.48% since this time last week.
The fact that traders have a net short position indicates that prices for the FTSE 100 may continue to climb, which is consistent with our tendency to adopt a contrarian perspective on the attitude of the crowd. Positioning is now more net-long than it was yesterday but net-shorter than it was last week. We have a further mixed trading inclination for the FTSE 100 as a result of the combination of the present mood and previous movements.