FTSE technical analysis overview courtesy of cantor index

2 mins. to read

In the past couple of weeks the FTSE had posted some minor profit taking, red parallel lines. However the price action in recent days has lifted the index back to fresh multi year highs.

This recent move higher came out of the price action breaking out of the near term trading range, red parallel lines. The bulls will hope this was a traditional flag pattern giving considerable upside potential. Last week we detailed how Candlestick followers would be slightly concerned that the higher highs from this possible flag formation were followed with a Bearish Engulfing candlestick pattern, and then followed by an Inside Day, Harami Cross, all signalling that the recent buying momentum may have run its course.

This describes the wider market nervousness of the seemingly endless push back to the all time highs. While the near term trend remains in tact, blue line, these candlestick patterns remain as notes of caution rather than outright trigger points. The RSI over this period has posted bearish divergence, posting higher highs in price, not matched with higher highs in RSI. What is interesting however is that has since then posted Positive Divergence in the RSI, Orange line. Positive Divergence often occurs after bearish divergence, as in this case. But rather than confirming the negative outlook of the bearish divergence it actually signals significant buying pressure.

The underlying logic is quite simple, essentially it highlights that RSI in the past few days has posted a lower low, Orange line. As mentioned above this has followed the RSI Bearish Divergence, so we would fully ‘expect’ the FTSE 100 also to have posted a lower low in price. It has not. This is positive divergence. The fact that this has occurred at the RSI 50 level also helps the bulls believe that the underlying buying trend remains intact, and that once the near term nervousness has passed the FTSE 100 has higher to go. 

So in summary the FTSE has posted some sharp moves higher from November, and seems to have moved into some natural consolidation areas. The near term trend remains in place and while the 50 level holds on the RSI, the outlook remains skewed to the upside, the price action would need to break the November trend line to negate this positive stance.

For more interesting research & professional Technical Analysis from Cantor Index click here to register for free.

Comments (0)

Comments are closed.