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FTSE 100 bounces aided by higher oil prices and lockdown easing hopes

ftse 100 index tickers

The FTSE 100 index has bounced from its early February lows, aided by yesterday’s strong uptick prompted by higher oil prices and optimism about the progressive easing of lockdowns in the United Kingdom.

The British stock index advanced 2.5% during yesterday’s stock trading session at 6,756, this being its highest closing price since 14 January, while it ended the day near the session’s high.

Meanwhile, the footsie is trading quietly this morning, advancing 0.1% so far in the day at 6,765 as bulls take a breather after pushing the price from the low 6,400s – producing a 6% gain in roughly 16 days.

Oil companies have been among the biggest winners within the FTSE 100 index, with Royal Dutch Shell and BP advancing 6% each yesterday amid a spike in oil prices caused by tensions in the Middle East and a potential supply disruption in the United States resulting from a strong ice storm in the state of Texas.

On the other hand, mining companies including Glencore (GLEN) are advancing strongly this morning as well, with the British miner posting a 3.3% gain after it announced the resumption of its dividend payments amid favorable conditions in the commodities market.

FTSE 100 companies could also benefit from the easing of lockdown measures in the United Kingdom from 22 February and forward, as Prime Minister Boris Johnson announced yesterday that he will be outlining his plan to progressively lift restrictions by then.

The head of the British government emphasized that the nation has made “huge progress” in rolling out vaccines, effectively administering a first shot to a total of 15 million people – roughly a quarter of the UK’s population.

However, Johnson remains cautious about lifting restrictions too fast as the number of hospitalizations remains high despite receding from the mid-January peak of 40,000 hospitalized patients.

What’s next for the FTSE 100 index?

ftse 100 index
FTSE 100 index (UKX) price chart – 1-day candles view with volume, MACD, RSI, and other indicators – Source: TradingView

The chart above shows that the 6,400 lows seen by the FTSE 100 index in early February may have been the bottom of the downtrend that started in the early days of 2021 – a moment when the COVID situation worsened amid the discovery of a new strain of the virus.

This bounce may be an interesting one to ride as the country heads to ease lockdowns and given the fact that oil prices have kept advancing above the $60 level – a great price for oil producers and trading companies.

For now, a move above the 6,750 level could provide further confirmation that this is the beginning of a new bull run for the British index – a view that is reinforced by the MACD oscillator as it has already sent a buy signal while it emerges to positive territory.

Meanwhile, the RSI remains on an uptrend at 65, which means that the momentum is fairly positive for the British index.

However, there’s one particular troubling signal that traders should keep an eye on and that is a death cross in the short-term moving averages, with the 20-DMA crossing below the 50-DMA despite the fact that the price of the index is moving higher.

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Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.