There’s been a lot of chatter about the UK vote to leave the EU (Brexit). Most of the talk last week was negative as the British Pound cratered. However, that negativity has been muted into the holiday weekend as stocks have rallied higher. Moreover, the London stock market (INDEXFTSE:UKX) has rallied in the wake of the vote. And a major London FTSE stock market breakout may be in the cards.
Or, at a minimum, the setup is there.
Last week, traders saw the FTSE Index reverse higher and more than recoup losses. In fact, it was the best week since 2011. This action produced a minor breakout on the FTSE that may setup a major London FTSE stock market breakout (see chart below).
As you can see, the FTSE touched a lower channel support line early this year (as fear was rising). It bounced off that level and formed an inverse head and shoulders pattern. Last week’s reversal has seen the London stock market breakout above a descending trend line. And the chart is now threatening a breakout above the neckline of the inverse head and shoulders at point (1).
Keep an eye on what the London stock market does here. If prices should follow through higher that would confirm the pattern and set up another retest of all-time highs (it’s hit this area 3 times in 20 years).
Thanks for reading and best of luck out there.
The author does not have a position in related securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.