FTSE Technical Outlook – Rally Continues, but Caution Warranted
- FTSE continues to extend rally following breakout of H2 2017 range
- Projected target zone of 7850-7900 nearing, but…
- Fresh longs cautioned as retracement risk heightens on short-term pattern development
Last week, when we discussed the FTSE we noted it as likely to continue trading higher as long as it didn’t fall back inside the range which developed during the second-half of last year. The target based on the height of the range (~300 points) pointed to an objective of 7850/900. We’re getting close.
Caution on new longs is warranted at this juncture, though, as retracement-risk is beginning to increase with each new push higher. On the hourly time-frame, a rising wedge is developing which may usher in a pullback. If the lower trend-line extending higher from 12/15 is broken, it could lead to the first real test of longs’ resolve in over a month. Rising wedge formations can lead to swift moves once triggered (if triggered).
In the event of a breakdown out of the pattern and 12/15 trend-line, support levels begin arriving around 7717, 7690, then nothing of substance until down around 7625. A move to that point will be closing in on the breakout zone of 7600/550, and we will certainly want to start finding buying interest at that point if the broader rally is to persist.
From a tactical standpoint, traders who are long can use the trend-line/rising wedge as a guide to stay the course as long as the current trend structure maintains its integrity. Aggressive short-term traders who are looking to short will be best served by waiting for a confirmed break of the pattern/trend-line; just because there is a bearish-looking price pattern doesn’t mean necessarily that it will trigger…
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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.