FTSE 100 Forecast: Fighting Two Separate Trend Lines

It looks a lot like a beach ball being held under water, and we are trying to build up the inertia to finally break out and above.

The FTSE 100 was a bit choppy during the trading session on Monday to test a significant area of confluence. The bottom of the ascending channel is going to perhaps offer resistance as it was previous support, and now we have the sideways line and the 7100 level, which has offered resistance. We are essentially making an “X” with a couple of trendlines that are coinciding. Furthermore, we also have the 50-day EMA sitting just below, so I think we are going to have a bit of “squeezing” in the short term.

The FTSE 100 moves right along with risk appetite, so pay close attention to multiple other indices around the world, as the stock markets tend to move in the same direction overall. In other words, if we see the Asian indices start to sell off early during the session, then it could give you a little bit of a “heads up” as to where we are going next. If that is the case, then it is possible that we could see the FTSE continue to struggle and perhaps make a dive down towards the 50-day EMA. Alternatively, if Asia takes off to the upside, then it might give us a little bit of a “push” to get above the 7100 level, which I have tentatively marked as the area that we must overcome.

Even if we break above the 7100 level, there is also the argument to be made for the gap that sits just above there causing issues, so it may take a little bit of effort to get beyond the 7200 level. Once we get above there, though, we are beyond the gap, and have clearly busted through a lot of resistance. If we were to break to that level, then I anticipate that we will simply continue the overall “buy-and-hold” attitude that we have seen for some time. However, if we were to break down below the 50-day EMA, then it is possible that the FTSE 100 may need to fall in order to reach down towards the 200-day EMA which currently sits at the 6763 level underneath. Either way, it looks a lot like a beach ball being held under water, and we are trying to build up the inertia to finally break out and above.

FTSE 100 Index

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.