FTSE 100 Technical Highlights:
- FTSE 100 reversed sharply on attempt to break below support
- Wedge pattern developing, will need to wait for confirmation
FTSE 100 outlook may hinge on pattern development
On Friday, we looked at the possibility of the FTSE 100 confirming a breakdown out of a head-and-shoulders (H&S) top and below the 200-day MA which is in confluence with the neckline of the pattern. To start the week the FTSE was trading well below the neckline and 200-day before a sharp reversal posted a key-reversal candle.
The rejection demonstrated a willingness by buyers to keep the UK index afloat for now. It may have been enough to propel the market higher, but with a sequence of lower highs still a possibility it may have only bought more time before further weakness.
A wedge pattern is beginning to come into view. It’s taking form as a descending wedge which suggests we may an eventual down-move come to roost again, but we will need to wait for a tighter pattern and breakout in either direction before running with a trading bias.
In the near-term, tightening range conditions are seen as the most likely outcome. On the top-side, the trend-line from the April high is just a short distance away, while a drop lower will quickly bring back into play the area around 7150. For now, risk/reward looks unfavorable until we see further price action provides a cue.
FTSE Daily Chart (wedge in development)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX