FTSE 100 Tech Update: Top and Bottom-side Levels in Focus
- FTSE 100 continues to rise, pullback risk heightening
- Top-side resistance in form of trend-line back to Oct 2015
- Support at prior record high breakout levels
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On Thursday, we discussed the increasing risk of a decline hatching in the FTSE 100 despite the impressive persistence of the rise dating back to 12/2. It’s been the most stable market when looking at the major players in the global spectrum, but momentum is showing signs of stalling as the UK index is only a few points higher than where it was at the high of the day on the first trading day of the year.
We see no reason to be immediately bearish the FTSE, though, but as we said last week, and we’ll say it again, the index is in need of a pullback or consolidation period in order to alleviate overbought conditions; this will also improve risk/reward for new long positions. From a price action perspective, there isn’t anything clearly bearish, but it’s not a bad idea to implement a trailing stop strategy to protect profits at this juncture.
A level, or line rather, of resistance we are watching arrives around the 7300 handle. The top-side trend-line extends back across peaks in October of 2016 and 2015. It’s not considered a significant level of resistance, but should the market reach up to this line without first pulling back, it might be all that is needed to put a lid on the market in the current state of extension. At that point, aggressive traders may look to take a crack from the short-side. We’ll discuss further should the market rise to that point in the days to come.
A ‘buy-the-dip into support’ approach is preferred at this time. The first major area of support arrives at the prior record highs (intra-day high – 7104, closing – 7130). A move back into this zone could offer up a solid opportunity to join the trend higher, or at the least a spot for very short-term traders to enter from the long-side with in mind that a bounce develops initially.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.