What’s inside:
- FTSE 100 softens after springing to new record highs
- Looking to levels below for support in addition to potential bull-flag
- Bias is still generally bullish, but the market will need to find its footing at levels outlined
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When we last discussed the FTSE 100, it had just exploded to new highs with the help of solid global risk appetite following U.S. President Trump’s address to Congress and a weak pound. The index edged above the top-side 2013 trend-line and was squaring up against an upper parallel paired off with the trendline rising up from early February. Since turning lower the footsie is trading back below the long-term top-side trend-line and the old highs from January. The upper parallel proved to be pivotal, so we’ll keep a close eye on it should it come in play again on the way back up.
For now, we will be looking to a series of levels below for support. First the ~7330/00 area, where several intra-day highs took place during the third week of February. Looking closer at price action (1-hr chart), we can see the development of a bull-flag. The pattern needs to fully mature and eventually break the top-side parallel, but it could be a solid guide for new long entries.
Should we see the ~7330/00 area give-way to selling and the bull-flag configuration broken, then a larger decline could be underway, which may bring the 2/2 trend-line into play down near 7250. If the current technical structure is to remain pointed towards new highs in the very near future, then short to intermediate-term trend support will need to hold. A drop much beyond there won’t ‘wreck’ the trend, but start raising questions. Not far below the above-mentioned levels lies longer-term trend support by way of a trend-line extending up from the ‘Brexit’ lows (it’s been drawn in a couple of ways given the extreme tail caused by the vote, but both run in the same neighborhood at this time). In addition, the 2/24 pivot is in the area as well. A break below the June trend-line and swing low, an event not likely in the very immediate future, would be required to fully back off a bullish bias, and likely means we are seeing broad global risk aversion not isolated to just the U.K.
FTSE 100: Daily
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—Written by Paul Robinson, Market Analyst
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