The financial meltdown has spared no indices. The UK100 plummeted to levels last seen in 2011, just shy of the critical level at the 4500 handle.
It’s a confluence of some major tops and bottoms seen during the 2008 market crash. These were broken to the upper side causing one of the best bullish rallies lasting 12 years.
The weekly chart above speaks of volume. However, it hints at a major support structure.
We just had a full retest of the multiyear descending wedge prompting a quick bounce, which is looking healthy. But, it needs to test the 5750/800 region and attain a daily close above to fortify the view of a bottom being in place. This should allow rallies to commence.
While we hold on to the lows of the week, price action shows a high potential of a reversal. We can then start to look for prices to register 5800, followed by 6500, to begin with.
The 2-hour chart below represents a current descending trendline break structure to the higher side. Overall, the chart layout still projects a potential bear flag and it still carries a risk for a further drop back to the weekly lows as long as it remains trading within the ascending channel.
It is very likely to see a test to the upper band of this potential bear flag channel, near the 5640 level.
In case of a break higher we can expect rallies to test 5750. A full retrace would call for further gains towards the 6500 level.