The fact that we are floating around the 6600 level and formed that signal does tell you that we are very likely to continue to go higher.
The FTSE 100 initially gapped lower to kick off the trading session and test the bottom of the hammer from the previous session on Friday. However, we have turned around at the 50-day EMA to break above the 6600 level. This is a market that I think will continue to see buyers on dips, as we have seen over the last couple of weeks. The size of the candlestick suggests that there is plenty of support, so I think that what we are looking at is a potential move towards the 6750 level, which was the most recent high.
On the other hand, we could pull back over the next couple of days occasionally in order to build up the necessary momentum to continue going higher. The longer-term target for me is closer to the 6900 level, perhaps even the 7000 level. This does not mean we will get there overnight, so I think that we have to look for short-term pullbacks to take advantage of.
As far as selling is concerned, I would not be thinking about that until we break down below the 200-day EMA, which looks a bit like an uptrend line. That is currently down at the 6378 handle, so I think given enough time we could see a lot of buying pressure in that area due to the fact that a lot of value hunters would be involved in the market at that point. I do think that the market will eventually go looking towards the 7000 handle, based upon previous consolidation and the overall momentum. Breaking above the 6750 level is crucial, as it would be a “higher high”, and one thing to pay attention to is that the Friday candlestick was a complete reversal of fortune, as it is a “bullish engulfing candlestick”, which is also a very important candlestick to pay attention to. The fact that we are floating around the 6600 level and formed that signal does tell you that we are very likely to continue to go higher. A break of the candlestick is a nice buying signal from a straightforward technical analysis standpoint, and something that I plan on taking advantage of if I do not get a pullback that offers value.