It was a wild year for UK investors. Besides double-digit inflation and labor shortages, politics moved financial markets too.
Take the mini-budget’s announcement, for instance. It triggered a sharp move lower in the GBP rates (e.g., GBP/USD dropped below 1.04) and UK bonds.
The Bank of England had to intervene to support markets. But until the Prime Minister resigned, there was little the Bank of England could do.
In any case, the arrival of Rishi Sunak brought much-needed stability. The pound recovered the lost ground (and some more), and so did the UK stocks.
FTSE 100 index is back at levels seen at the start of the trading year. It outperforms US stocks, which are still well in negative territory for the year.
FTSE 100 next possible target – 10,000 points
It sounds more like an impossible target, but this is what technical analysis points at. The 2022 price action looks like a bullish flag pattern. Only in a flag do you have such wild up-and-down swings as we’ve seen this year.
If that is correct, then investors’ focus shifts to the pattern’s breakout.
The way to trade a bullish flag is to project the measured move (seen in blue) on top of the flag in order to find out the projected target. The measured move has about 2,000 points; if we add it on top of the flag, then 10,000 points for the FTSE 100 is not so impossible anymore.
Even the time element supports a bullish move in 2023. It is said that a true bullish flag pattern reaches the measured move in less or the same time as the move before the flag’s formation.
Therefore, on a bullish breakout, the FTSE 100 index should reach 10,000 in about one year.
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