FTSE 100 Seeking Resolution from Range, Be Careful of False Breaks
- FTSE 100 range continues (good for range-traders, bad for trend traders)
- A break in either direction will bring the index to significant levels, false-break alert
- Tactical considerations outlined with levels
For nearly two weeks the FTSE 100 has been trading back-and-forth in a range. If fading price swings is your forte, then the UK index has been the place to be. For those trying to latch onto a trend, it’s been a tough trading environment. When will the range break? Likely soon, but in both directions there could quickly be opposition upon a breakout which lead any breakout we see to be short-lived, and as a result – false.
On the top-side, a clean break above the 7388 threshold will quickly bring the underside of the June ‘16/’Brexit’ trend-line and 2013 trend-line into play; both are lining up in the vicinity of 7410/7425. Also, given it would be against the trend off the June high it might be a difficult move to sustain.
Looking lower, clean break of 7302 is needed to get the market moving lower, but with the February 2016 trend-line running not far beneath momentum may quickly be muted on a range-break.
From a tactical standpoint, this makes positioning tricky. One of the ‘safer’ ways to enter on a range breakout is to wait for a confirmed breakout (closing bar outside of the range), and then re-enter on a retest of the broken level. For those taking range-fades, we’re now sitting at the upper-end where a steadfast level of resistance remains.
The general trend since June coupled with the fact other European indices look heavy suggests an upside breakout may be false, and that should we see a downside break the 2016 trend-line might not provide the support needed to keep the footsie from falling. But until we get a cleaner set-up, we’ll reserve ourselves until we see a resolution.
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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