The FTSE 100 initially tried to rally during the trading session on Monday but gave back the gains as we got near the 7000 handle. It is obviously a round figure that a lot of people are paying attention to, and we have formed a bit of a shooting star. We are a little bit over-extended, but at this point it looks like we will probably find buyers on some type of dip, so I think a “buy on the dips” attitude will continue to be the main driver.
Underneath, the 6800 level is where we had broken out from, and that should now be massive support going forward. We had broken out of an ascending triangle, which measures for a move towards the 7200 level, and I think that we will eventually get there. That being said, the 7000 level would be a barrier to overcome. If we can break above there, then I think fresh money will come into the FTSE 100 as we see stock markets around the world continue to get a bit of a boost due to all of the liquidity measures made by central banks globally. The UK is not going to be any different, as the Bank of England continues to flood the markets.
The United Kingdom has a significant amount of strength at the moment due to the fact that the vaccination program has been so rapid there, and the idea of a Q2 opening of the British economy. As long as that is going to be the case, I believe that the FTSE 100 will continue to be very strong. The 7000 level offering resistance is just simply a bit of a head fake, and a short-term issue more than anything else.
Underneath, the 50-day EMA comes into play and it has been walking up the uptrend line of the ascending triangle, so I think that will offer your “floor in the market”, But at this point, it is likely that we will not even get there. This pullback should make for a nice buying opportunity at the first signs of a bounce underneath. I will take this day by day, and place the next trade based upon a daily candlestick such as a hammer or engulfing bullish candlestick.
