Lack of Follow-through After Vaccine-led Rally
- The UK or Europe as a whole had been greatly impacted by the Covid-19 virus as seen from the sharp sell-off earlier this year as with most indices. In a bid to recover, the UK100 had rebounded strongly since April but fears of a second wave caused markets to drift lower.
- More recently, the market again rallied strongly on the back of the news of vaccines having positive results. Based on the chart, the market moved strongly to an area of confluence of resistance – top of a possible channel and also a previous spike high. After the initial reaction, momentum seems to have dried up and there is no follow through on the positive news as early bulls start taking profits.
- It seems as though traders are not confident of a further improvement in market conditions given potential logistical concerns on distribution of vaccines, and the ability of manufacturers to keep up and governments / health agencies to procure them for citizens. Markets remain in confusion and is at an area where further positive news can spark a rally back up to pre-covid levels. However as it is, market looks poised to drift downwards to form an ascending triangle before breaking out.
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