- FTSE strong rise on Tuesday immediately reversed yesterday
- Never closed above the 11/22 key-reversal day
- Overall trend is lacking, but more supportive for shorts than longs
The FTSE rallied strongly on Tuesday, only to erase nearly all of those gains during yesterday’s session, and then some counting this morning’s price action. One important thing to note about the one-day rally was that while it exceeded the 11/22 rejection-day high on an intra-day basis ever-so-slightly, it never closed above. Yesterday’s turnabout further solidifies the 7460s as a critical point of resistance, and with two strong rejections in place it should hold as a ceiling for the foreseeable future.
These rejections have also taken shape within a developing bearish sequence of lower-highs and lower-lows. The first lower-low came on last month’s dive while the first lower-high is becoming cemented with the help of the aforementioned resistance. Next up is for another lower-low to develop on a break of 7350.
It won’t be long from there, should a breakdown take shape (looks probable, maybe even this morning), that a big area of support extending back to late-June will come into focus. The zone surrounding 7300 (7290/315) was in play as support on numerous occasions from June-August. This is the first spot to look for the footsie to possibly firm up. If it doesn’t, then we’ll next look to the trend-line running higher from the April low beneath the September trough; this line currently clocks in around 7250/60.
At the end of the day, the FTSE hasn’t been a particularly easy index to get a handle on (most haven’t recently), but overall trend structure and staunch resistance suggest trading should be ‘smoother’ for shorts than longs.
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---Written by Paul Robinson, Market Analyst
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