The FTSE 100 rallied a bit during the trading session on Wednesday but gave back the gains relatively early as it continues to be very choppy. That being said, the market is likely to continue to focus on the 7000 handle above which has been so resistive. Recently, we formed a massive red candlestick, and we have not taken that out to the upside yet, so this still suggests to me that we may have a little bit of work ahead of us.
The ascending triangle underneath would be something that a lot of people will be paying attention to, as the triangle is so obvious. The 6800 level was the top of that triangle, and it is also where we have bounced from, which suggests that there is a significant amount of support and resistance, and therefore it is likely that we will continue to look at it as important. Underneath there, we also have the 50-day EMA that is currently sitting at the 6756 level and rising to reach towards the 6800 level. It is also worth noting that the 50-day EMA is hanging right around the uptrend line of the ascending triangle, so that comes into play as well.
It is not until we break down below that uptrend line from the ascending triangle that I would be negative about this market, and even then, I suspect that it is only a matter of time before the buyers will return, perhaps near the 200-day EMA. If we break down below the 200-day EMA, the market is likely to start selling off drastically. That is the least likely of scenarios, but it is one that you must pay close attention to.
On the other hand, if we break above the 7000 level, then we can complete the “measured move” of the triangle, which measures for a run towards the 7200 level above. That is a large, round, psychologically significant figure, but at this point I think it is only a number more than anything else. I do believe that the FTSE 100 will eventually rally, but it may be very noisy in this general vicinity as we still try to work out the reopening situation in the United Kingdom.
