FTSE 100 Tech Update: Buyers Found, Resistance Ahead; EU Vote Adds a Wrinkle
- FTSE finds late-day buyers, futures furthered along with help of U.S. stocks reversing
- Big picture H&S pattern still in play, working on retest of neckline
- Circumstances are unusual with the vote coming up, trading plan needs to be adjusted accordingly
Yesterday, in the last hour of the cash session the FTSE found buyers and the futures were then boosted further with some help from across the pond.
Even with risk sentiment improving in the last 24 hours, the FTSE remains within the construct of a bearish trend following an important break of the ‘head-and-shoulders’ neckline. The H&S formation indicates a much larger drop ahead.
Today’s modest follow through on yesterday’s reversal is pushing the UK index towards a full retest of the neckline break, not an uncommon occurrence. The FTSE day high so far is ~6030, so it’s very close to pressing up against our noted zone of resistance in the ~6050/80 vicinity. It’s close enough to call a retest, in our book. A rejection from here or a little higher is our cue that we’re headed lower.
FTSE 100 Daily
Which brings us to a very important topic: Under 'normal' circumstances there would be little hesitation on this end to look for an opportunity to short off this key area should price action warrant such a maneuver. However, we aren’t trading in times of “normalcy”, are we? No. The upcoming ‘Brexit’ vote throws a wrinkle in taking a position in anything directly UK-related, namely the FTSE and sterling. Especially heading into the weekend.
With that said, trading time-frames should be dialed down along with leverage, and extra caution is warranted. Going into the vote itself, flattening out positions is a recommended strategy. Once we see what the outcome is and how the market reacts to it, we can then assess what the most appropriate course of action will be.
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---Written by Paul Robinson, Market Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.