FTSE 100 Technical Analysis: Big Resistance Coming into Focus
FTSE 100 Technical Highlights:
- FTSE gained some momentum in recent trade
- Test of big resistance over 7000 is important
- Watch price action closely for further guidance
The FTSE 100 has been rolling higher the past couple of weeks after a choppy episode of trading. This was thought to potentially be the case when we looked at the index last week, as momentum was bound to come in at some point.
With the rise in place, stiff resistance starting from just over 7000 up to around 7150 looks likely to be coming into play very soon. The zone could indeed be a tough one for the FTSE to get through given how many times it was support throughout 2019.
There are roughly half a dozen times when the market bottomed during that 2019 stretch, which implies we should at least see a pause in the trend upon testing. How the reaction plays out will be important for determining a further bias.
If no rejection occurs, resulting in horizontal price action or simply an outright breakout, then it may not be long before even higher levels are achieved. It would still require a strong run to get to the record high over 7700, but the path will begin to become clearer.
In the event we see price get above the noted resistance zone, it will flip to becoming a potential source of support on a dip.
On the flip-side, since we are not yet at the zone we must of course still consider that it results in a ceiling. Given how the FTSE has traded, trading strongly higher then turning into a chop-fest for a few weeks to follow, it is quite possible this is the outcome here shortly.
From a tactical standpoint, existing longs may sit tight and see how price action plays out before making any material adjustments to risk. For those looking to initiate a fresh long, risk/reward isn’t particularly favorable here. And would be shorts might want to take a wait-and-see approach and see if a rejection can’t develop first before turning aggressively bearish.
FTSE Daily Chart (heading into big resistance)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.