FTSE 100: Carrying Higher into Significant Reaction Zone
- The FTSE 100 continues to burst higher
- Pushing into big reaction zone
- Shorts favored on signs of a reversal
The FTSE 100 officially wiped away all losses sustained on the unexpected outcome from the EU referendum. It's actually higher now than where it was a week ago. The rally from its depths registers around 11% at this time, an impressive turnabout.
The FTSE has been a choppy, range-bound market to trade for nearly a year; and recent events may only reinforce that theme for the foreseeable future.
With that in mind, as we stated yesterday, we will take a mean reversion, range-trader’s approach. The market was a good 130 handles lower when we posted yesterday’s commentary, but now it is getting into interesting territory. We were looking for the mid-6300s up towards the mid-6400s as our reaction zone. To be precise the range of resistance is between 6353 and 6487.
We are there now. But, on this end it is preferred we see a sign of momentum turning before taking entries against key levels. Sometimes those signs are clear as day (i.e. ‘pin’ bar reversal) and at other times the turn is subtler with no striking rejection at support or resistance (i.e. small doji). And often times, nothing more than a red bar or a green bar in the opposite direction.
In any event, whether you are long and looking for a spot to exit or a ‘would-be’ short awaiting a spot for entry, it is time to pay attention to how price action behaves at current levels.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.