The FTSE 100 initially pulled back a bit on Friday, but then turned around to form a hammer. The hammer is a very bullish sign, so it is likely that we will try to break above the top of the candlestick for the day to reach towards the top of the shooting star from Thursday. Breaking above that level then opens up the possibility of a move towards the 7200 level.
The 7200 level is an area that has been massive resistance previously, so I think it is only a matter of time before we will have to test that area again. If we can break above there, then the market is likely to go much higher, perhaps reaching towards the 7500 level. That is an area that would attract a certain amount of attention based upon psychology, but I certainly think it is a longer-term target.
Pullbacks at this point in time should continue to see a lot of support, especially near the 200-day EMA. The 6800 level underneath is massive support as well, as it has been an area that we have bounced from multiple times. In fact, I look at that as the “floor in the market” currently, and as long as the FTSE 100 can stay above there, then it is likely that buyers will come back to pick up value. At this point, the market also has the 200-day EMA sitting at the 6050 handle, and it makes sense that it would offer support as well.
The recent action has been a bit stagnant, but the impulsive candlestick that we had seen on Wednesday suggests that the underlying strength will continue to push this market to the upside. But that does not necessarily mean that we cannot pull back just a bit. I think the market will go higher, but that does not necessarily mean that we are going to go straight up in the air. So, with this being the case, I like the idea of buying short-term dips. However, I would be cautious about my position size, and only if we continue to move higher would I add along the way.
