The FTSE 100 initially fell during the trading session on Wednesday to reach down towards the 6800 level. The 6800 level is where we had seen previous resistance and has even been tested once. Now that it has been tested again and we have seen such a nice move to the upside, it is likely that the FTSE 100 is going to go looking towards the highs again. The 7000 level was basically the high, and it is a large, round, psychologically significant figure. That would attract a lot of attention, so I do think that it will probably offer trouble again. However, if we break above there, then it is likely that the market will take off from there to go much higher.
Looking at the previous action, the ascending triangle offers a structure off which to trade, and currently the market does seem to be paying close attention to it. Furthermore, the measured move from the ascending triangle suggests that we are going to go to the 7300 level, so that is my longer-term target. I do recognize that 7000 is going to be difficult to overcome, so I anticipate a rough couple of days right around that level. Nonetheless, the market is in an uptrend, so obviously you want to be bullish and not be a seller.
Underneath, I think the 50-day EMA offers support even if we do break down back into the ascending triangle, and most certainly the uptrend line underneath there would be offering support as well. Because of this, I think it is probably best to simply look for value in order to go long again, or I may just simply buy on a break above the highs of the trading session on Wednesday. Yes, the Tuesday candlestick was very negative, but at the end of the day, the longer-term trend looks as if it is trying to reassert itself.
If we were to break down below the uptrend line, then I might think about possibly buying puts in order to take advantage of the negative action without exposing myself to horrific losses as central banks around the world continue to flood the markets with cheap money. Beyond that, it is simply a “buy on the dips” market longer term, and that is the best way to not only play this market, but most indices as well.
