The FTSE 100 rallied significantly during the trading session on Monday, breaking towards the 6925 handle. This is a good sign, as we had recently pulled back to a previous breakout point, and now have bounced significantly to prove that to be important. The top of the previous ascending triangle is what I am talking about, and it is very likely that people will be looking at this as another sign that the market is ready to go higher. The size of the candlestick is not necessarily an anomaly, but it is worth noting that it is bigger than the last several days.
Having said all of that, we have still not wiped out that massive red candle from last week, so it does make sense that we still have to be somewhat cautious. At this point, taking that candlestick out almost certainly has the market challenging the 7000 level again. The 7000 level being broken to the upside is obviously the goal for bulls, as it would open up a psychological barrier for a much bigger move. Above there, the market is likely to see a move towards the 7250 handle, possibly even 7300 based upon the “measured move” of the previous ascending triangle, so technical traders will probably be aiming for that region.
If we were to turn around and break down below the 6800 level, then it is possible that people will be paying close attention to the uptrend line of the ascending triangle, as well as the 50-day EMA which is walking right along it. Because of this, I think what we will see is a massive amount of support underneath that a lot of traders will be leaning on if we do get that pullback. I anticipate that in the short term, we will probably see continued bullish pressure that tries to take out the 7000 handle, something that may not happen the first time we get there. In other words, I believe that this is a market that remains bullish, but it will more than likely be relatively choppy at the same time. At this juncture, this is a market that cannot be shorted until we break down significantly below that previously mentioned 50-day EMA.
