technical analysis overview courtesy of cantor index

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Monday, January 14, 2013

FTSE DAILY CHART

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, red lines. 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 only be for the very active, 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.

So the index has posted an impressive start to 2012, some near term profit taking looks likely, buy on any such weakness.

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. The On Balance Volume has been gaining in recent months, confirming the positive trend, keeping bulls hopeful the resultant break will be on the upside. 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 the outlook for 2013 remains muted. The upside potential has improved, but we do still feel it is too early to turn outright bullish, just yet. Levels held above 6105 are positive, but confirmation from the S&P is required to genuinely open up positive H1 2013 targets.