FTSE DAILY CHART (JAN 21 2013)
In the past few weeks we have kept a close eye on the 2012 highs, as these had been seen as a major resistance area, with added importance due to its close proximity with the psychologically important 6,000 level.
We can see how the FTSE has pushed through the 6,000 level and through the cluster of previous resistance levels, including the 2012 highs, red line. In the near term the price action does look vulnerable to some profit taking, but due to the strong trend from the 2011 lows, red region, trading shorts would not be wise rather we would recommended drilling down to the individual sectors and stocks to find a stock in a bear trend, and look to short that, rather than the index.
Also on this week’s graph we have overlaid the graph of sterling, orange line. In broad terms we can see how there is relationship between the currency and the wider market. The near term action is quite interesting as cable, like the FTSE has found it difficult to break through its 2012 highs. Unlike the equity markets however cable is currently posting near term lower lows. This could indicate that cable is due some out-performance in the coming weeks, or that the FTSE is due to retrace back down to the 5900 level.
So the index has posted an impressive start to 2012, some near term profit taking looks likely, buy on any such weakness, hold in the interim.
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