I think a lot of traders are simply looking at this through the prism of “what next?”
The FTSE 100 was all over the place on Wednesday, breaking down through the recent consolidation area and smashing below the 7000 level quite rapidly. However, we have seen a little bit of support in the 6900 region to send this market straight back up in the air and form a massive hammer. As you can see, I have marked a purple circle that shows the overall area that we are trying to hang about, and it is also worth noting that the 50-day EMA is sitting right there and going flat.
If we were to break above the 7100 level on a daily close, then it signifies that we are more likely than not to go looking towards the 7200 level above. The 7200 level is an area that has been massive resistance multiple times, which is the top of a large consolidation area that extends from there all the way down to the 6800 level. This is an area that has been important for quite some time, and the fact that we are sitting at roughly 7000 suggests that we are near what you would consider to be “fair value.”
Ultimately, this is one of those markets that you are going to have to wait until we get a daily close with some type of impulsivity to take advantage of clarity. To the downside, if we were to break down below the 200-day EMA and the 6800 level, then it is likely that we will go much lower. At that point, I would have a target of 6500. On the other hand, if we break above the 7200 level, then it is very likely going to be a situation where you go into a “buy-and-hold” type of mode.
Looking at the FTSE, you cannot detach the problems in the United Kingdom from this index, most notably the fact that the UK cannot even provide its own fuel at the moment. With this being the case, I think a lot of traders are simply looking at this through the prism of “what next?” The market will continue to see a lot of choppy volatility, but this is one of those scenarios where once we finally make a move, everything will be obvious as to what you should be doing next.