The FTSE 100 has fallen rather hard during the trading session on Tuesday as liquidity picked back up, with North American traders getting involved. That being said, the 7190 level continues to be massive resistance, so if we can break above that level, then I think the 7200 level will finally be taken out. With that, I would be a very bullish trader, hanging onto a longer-term trade for larger gains, at least that is what I would anticipate.
To the downside, the 7100 level continues to be significant support, and of course the 50 day EMA is coming into the picture. With this, I think it is only a matter of time before the buyers return, and it does look like we are forming some type of rather sloppy ascending triangle, which in and of itself is a relatively bullish formation. With that in mind, when you look at the entirety of the “ascending triangle, we could go as high as 8200 in a market that obviously is bullish of the longer-term. That is not a seller mean that we take off right away, but it certainly looks as if we are trying to build the necessary pressure to make something like that happen.
To the downside, I believe that the 7000 level will be heavily defended, and then after that you are looking at the uptrend line which is currently crossing through the 6900 level. Underneath there, then you have the 200 day EMA. Nonetheless, if we get below the 7000 level, I think that you have a short-term selling opportunity, but the key here is that it would be “short-term.” As long as we can stay short term, then you have to be nimble enough to take a certain amount of momentum. Regardless, I think it is much easier to buy the breakout, as most indices around the world continue to see the benefit of cheap monetary policy coming out of major central banks.
Looking at this chart, it has been very choppy, so I think once we do get the move, it will be rather explosive. That would be nothing new for the FTSE, as we tend to grind back and forth in a tight range as before suddenly making a bigger move. In the meantime, be cautious with your position size and let the market tell you which way we are going.
