The FTSE 100 initially sold off during the trading session on Friday, but we broke back above the 7000 handle going into the weekend. That is a positive sign, as we did end up forming a bit of a hammer, and have now completely filled the gap from a few sessions ago. That being said, this is a market that should continue to find buyers on dips as we have been in an uptrend, and the 50-day EMA underneath has offered support. What's even more interesting about the 50-day EMA in the support that we see there is the fact that you could extend the uptrend line from the previous triangle, meaning that even if you are not a big fan of trading triangles, perhaps you could take a look at the potential uptrend line that holds there.
I believe that we will go looking towards the highs again and eventually break above the 7200 level. That suggests that we could see a bit of a grind between now and then, as there have been multiple choppy behaviors. If we can break above the 7200 level, then it is likely that we will go much higher, perhaps reaching towards the 7500 level. The 7500 level is obviously an area that would attract a lot of attention not only due to the fact that it would have rallied so much, but the fact that it is a large, round, psychologically significant figure. With this, I think that the market is also looking at the 6800 level underneath as massive support, and perhaps a “floor in the market” as we have broken out from that level. Because of this, I do not necessarily see the market breaking down below there, but if it did, then the next support level is probably going to be the 200-day EMA which sits at the 6600 region.
I think this is a market that will eventually take off to the upside, mainly due to the “reopening trade” that everybody is so heavily invested in when it comes to stock markets around the world, and the massive amounts of liquidity sloshing around in the system trying to find some type of return.
