FTSE 100 TECHNICAL HIGHLIGHTS:
- The FTSE is working towards a breakout, but…
- Can’t jump the gun as we need to see confirmation.
- Multi-month consolidation could lead to 2020 highs and better.
The FTSE 100 is working on breaking out of the multi-month range it has been building since around May. If we see a close above 7220 the market may indeed string together a run that takes it back towards the pre-pandemic highs and possibly better.
But before getting too bulled up we want to see at least a daily close in breakout territory, and given the duration of the consolidation pattern a weekly close would be even better. We may get it this week if buying pressure continues to persist through end-of-day tomorrow.
Upon confirmation of a breakout, the next point of resistance to watch is a trend-line running lower from the 2018 high, this currently lies near 7400. Beyond that point the 2020 highs at just shy of 7700 could come into focus.
But as it happened the last time we discussed the FTSE, a rejection could soon occur, and while this in of itself won’t turn the outlook bearish it will keep things neutral. In this scenario, if later the FTSE is to undergo a bullish breakout it would be preferable that weakness be muted and price stay near the high end of the range. Increased pressure prior to a breakout increases the likelihood that it won't result in a false breakout.
For the outlook at this time to turn decisively bearish we will need to see a hard turn down in momentum that takes out the 200-day moving average along with the bottom of the range at 6813. Barring any major shocks this is unlikely to happen any time soon.
FTSE DAILY CHART
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Written by Paul Robinson, Market Analyst, 14th October 2021. DailyFX