What’s inside:
- The FTSE 100 is on the verge of breaking a steadfast trend-line
- ‘Head-and-shoulders’ top gaining clarity, but need to wait for a confirmed break
- Short-term traders may look to become more aggressive on confirmed break of June trend-line
In last week’s piece, we reiterated the importance of respecting the June trend-line until broken. While the FTSE 100 has lethargically held on to the line the index continued to hold. This morning we are seeing a push below the trend-line to start the day, but we will need to see a solid close beneath it before considering a valid break.
The price action in recent sessions has been difficult to say the least, with no clarity from one day to the next. The ‘head-and-shoulders’ (H&S) pattern discussed not long ago as a possibility is still working its way towards becoming a reality. In search for better symmetry, more horizontal work will help bolster conviction should at some point the FTSE break the ‘neck-line’. But even if it is ready to break sooner rather than later, we consider the pattern to have developed enough for our backing as a valid formation.
With a confirmed break of the June trend-line there is even more important support to consider now that there is a classic technical formation in play. The ‘neckline’ running back to the 8/4 swing low will need to be breached on a closing bar basis, along with a drop below the 11/4 low at 6676. Should the H&S top trigger, we will delve further into its implications.
However, until all this happens, the market remains above levels of support, and thus gives pause to swing traders becoming aggressively bearish. But, with one of those lines which has consistently held for much of the month on the verge of breaking, the shorter-term minded trader may have reason to become more aggressive in operations from the short-side until the next line of support is met in the vicinity of 6700/6676.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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