The FTSE 100 fell during the trading session on Wednesday to reach down towards the 7050 handle, before turning around to show signs of strength. The hammer that formed for the day is a technically bullish candlestick, and it is worth noting that we continue to push to the upside, and perhaps some type of bid to break out to the upside. In the short term, I believe that the market is going to go looking towards the 7200 level, which we almost hit last month.
To the downside, I still see the 7000 level as being crucial, right along with the 50 day EMA that is walking along the uptrend line that you see on the chart. The uptrend line is the remnants of the uptrend line from the ascending triangle that we broke out of, so there are plenty of technical indicators and reasoning to think that the market should continue to go higher. I also like the fact that we ended up forming a bit of a hammer, so that tells me that there are plenty of reasons to think that there are buyers underneath, most specifically at that 7000 handle, as the psychology of that round figure will continue to have its say.
Breaking to the upside, the market then goes looking towards the 7200 level, and then if we can clear that level, we are more than likely going to go looking towards the 7400 level before reaching towards the 7500 level which is my longer-term outlook. All things being equal, this is a market that has been bullish for quite some time and therefore I look at pullbacks as potential buying opportunities. Beyond that, we are in a bit of an up trending channel, so that yet another reason to think from the technical side that we remain bullish going forward.
If we did break down below the uptrend line, then I might consider shorting this market, but I would also have to take a look at indices around the world and see how they are all behaving at the same time. That would generally be a “risk off” type of situation, so I think you would have your pick of European indices to start shorting, not just this one. With that being said, it certainly looks as if we are much more comfortable going higher so keep that in the back of your mind.