The FTSE 100 rallied a bit during the trading session on Friday to wipe out quite a bit of the losses from the Thursday session. By doing so, it essentially “saved itself”, as we continue to grind higher based upon the ascending channel that we have been in for some time. The 50-day EMA is currently sitting right in the middle of the candlestick, so it could give you an idea of just how important this overall area is. If we can break above the top of the ascending triangle I have drawn, then I believe the market continues to climb the overall up trending channel. In order to break out to the upside, I believe that the market is going to have to close above the 7100 level.
To the downside, if we were to break down below the lows of the Thursday session, then it could very well have the market looking towards the 6800 level which is currently being chased by the 200-day EMA that sits at 6713. The 200-day EMA is sloping higher, so I do think that it will offer a certain amount of psychological support. That being said, if this market breaks out, then I suspect that a lot of stock markets around the world would be falling, if not at the very least the European Union.
When you look at the size of the candlestick for the Friday session, it was very strong, but we did not take out the Thursday losses like we did in some other indices. Because of this, the FTSE 100 may end up being a bit of a laggard overall, but it should be moving in the same direction as the DAX, MIB, and CAC. After all, it looks as if European indices continue to grind higher, despite the fact that it has been a little bit more sideways in the past two weeks. At this point, I believe that you need to be cautious about the position size of your trade, but if we do break out above the 7200 level, I would be looking to add to a position that I already would have gotten in at the 7100 level being closed above on a daily candlestick.
