FTSE technical analysis overview courtesy of cantor index
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FTSE DAILY CHART
In the past few weeks we have highlighted how the FTSE had broken down through its previous bullish trading channel. We mentioned at the time however that a trend line break does not necessarily equal a trend change, and that often a period of consolidation occurs following a break of this nature and indeed a period of consolidation followed.
The RSI on this move naturally is currently overbought, this should not be used as a reason to open trading shorts. However a take profits stance could be adopted by many here as the index could quite easily slip down to the 5700-5800 area while remaining in its new positive trend.
The more interesting graph at current levels is the weekly graph below, for the near term the index does look vulnerable to profit taking in the days ahead.
FTSE WEEKLY CHART
The situation on the Weekly chart will take some time to change greatly, so the text below may remain broadly same week to week unless major levels are broken. As with the monthly chart below however we will update the graph each week, and post all the text so that new readers will have all the information to hand.
For the Weekly chart we can see how the FTSE 100 has clearly had a hard time breaking up through the 6,000 area over the past couple of years. Over this period the market has posted a strong bullish trend, lower red trend line as the index continues a strong recovery from the 2009 lows. This trend line is attempting to support the market up to the 6,000-6,100 major resistance area.
A resultant break in either direction is unavoidable; the only question is how sizeable this move could be. Breaks under the longer term bullish trend line could see rapid moves down to 4783, the 2011 lows and the 50% retracement level highlighted. However breaks through the 6,000-6,100 would signal a positive longer term leg ahead for 2013. The FTSE has posted a decent start to 2013, moving above 6,000 and up to the 2011 highs.
Despite this near term strength however the outlook for 2013 remains more muted until the 2011 highs are breached. Ideally this would also be rapidly matched by higher highs in the US markets. Technical Analysts can attempt to ‘forecast’ the market, however the more consistent profits often are gained by simply reacting to what the market actually posts.
As a result while the FTSE has made positive moves, as yet the outlook for 2013 is muted. The upside potential has improved, but we do still feel it is too early to turn outright bullish, just yet.
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