- The index may not be good for comparison with the UK’s economy. Know the reason below
- The Index declined after being in a consolidation zone for over six months. Know how to trade in the FTSE index below.
- The FTSE 100 Index has bounced off its support, while the MACD and RSI have given a possible crossover signal
The FTSE 100 Index is a representation of the top 100 companies which are listed on the London stock exchange (LSE). This index was created with a value of 1000 points back in 1984. The companies are settled in the index via the weighted average calculation according to their market capitalization (share price times the no of outstanding shares).
It is widely accepted and popular for looking at the UK market as a whole. However, due to the development and growth of its top constituents, it may not show the actual picture of the UK economy. The top companies on the list are multinational giants whose revenues come internationally. A better index for looking at the UK economy will be FTSE 250 and FTSE 350 Index.
The Top 5 Companies in the FTSE 100 Index
The top 5 largest companies contribute 32.13% of the FTSE 100 Index alone, these companies include AstraZeneca PLC with a market cap of $224B, this health care giant is the top constituent. Followed by the famous Shell PLC with a market cap of $200B which is in the Oil and Gas Industry.
In the 3rd place, we have the finance sector giant, HSBC PLC with a market cap of $156Bn which takes up a share of 5.9% in the index. After the top 3, The FMCG giant, Unilever PLC stands with a share of 4.97% and a market cap of $131B. At last, we have Rio Tinto, acquiring 4.9% with a market cap of $108B
As one of the best investors in the world, Warren Buffet has advised everyone to invest in the indexes, as they are the easiest way to invest in the ‘economy’ of a country. The FTSE 100 Index has given a return of 3.47% (CAGR) in the last 10 years.
One can easily invest in the FTSE 100 Index with the help of exchange-traded funds (ETFs). It is a safe, easy, and non-engaging way of investing as a long-term investor. Several ETFs track the price action of the FTSE 100 Index.
The largest ETFs in terms of Assets under management are iShares Core FTSE 100 UCITS ETF, Vanguard FTSE 100 UCITS ETF, and iShares Core FTSE 100 UCITS ETF. However, if you looking for ETFs with cheap expense ratios, you may consider the HSBC FTSE 100 UCITS ETF
How Can One Take Trades on the FTSE 100 Index?
For trading the FTSE, one can make use of Contracts for differences (CFDs). brokers will generally offer CFDs that are based on cash Indexes like UK100. and a CFD based on the underlying Futures contract (FTSE 100.fs).
Just like in stocks, Leverage can be used for trading into the FTSE 100. which helps to speculate the indices’ direction without owning the shares of its constituents. The Traders can make use of the leverage and will have the ability to take both, long and short trades.
Technical Analysis of FTSE 100 Index
The FTSE 100 Index started rising in November 2020 after experiencing a deep fall during the COVID-19 phase. The index rose from $$5,554 in November 2020 to $7,123 in May 2021. From May to December in 2021, the FTSE 100 Index struggled to break its resistance zone of $7,146.
After breaking the level of $7,146, the index went into a consolidation phase with a cap of $7,658. which was broken in the middle of February this year.
As of this writing the FTSE 100 Index is trading at the level of $7,338. The index is seen bouncing off from its immediate support of $7,336. In addition to this, there is a second support down below at $7,146.
On the other hand, taking into consideration the current market trend which is looking to be sideways, it seems that the immediate resistance to the bulls would be at $7,699. However, a second resistance is seen at the level of $7,854, which may pose some challenges in the near future in the bullish rally if there are any.
What Do Indicators Signal?
Between the support and resistance, indicators are also providing some insightful information for the price action that can take place in the near future. Taking MACD for example, the graph shows a downtrend in both the MACD line and its EMA.
The MACD line made a bearish crossover with its EMA back in the starting days of August. As of this writing, the MACD line is giving a possible signal of a bullish interaction with its EMA. Both the lines are on the levels of -68 and -51 respectively.
RSI on the other hand is showing a possible trend reversal indicator. The RSI line spiked off its oversold level of 30 a few days ago this writing. The SMA of the graph which is on the level of RSI, at 38, indicates a possibility of a bullish crossover.
Furthermore, The EMAs have done bearish crossover after the bulls were rejected on the supply zone of $7,699. Currently, the 50 EMA which is on the level of $7,493 is coming down and looking to make an interaction with the price action. In addition to this, the 200 EMA is slightly above $7,548.
Conclusion
The FTSE 100 Index is a representation of the top 100 companies on the London Stock exchange, the index was created back in 1984 and it is currently widely accepted. The top 5 companies according to the market cap in FTSE 100 Index are AstraZeneca, Shell, HSBC, Unilever, Rio Tinto.
One can invest in this index using the Exchange traded funds (ETFs) and one can trade using Contracts for differences (CFDs). Currently the stock is seen rising above the support level of $7,336 while the MACD and RSI are on the verge of making a bullish crossover.
Technical levels
Support: $7,336, $7,146
Resistance: $7,699, $7,854
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
