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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

FTSE 100 Ready For Reversal

Stock-Markets / UK Stock Market Jun 07, 2015 - 12:23 PM GMT

By: Richard_Cox

Stock-Markets

Stock investors have been very kind to the FTSE 100 stock index for most of this year.  This outlook has been supported by forecasts for low interest rates into the second half of this year and by stronger than expected corporate earnings in most industrial sectors.  According to one options think-tank this has led to increased buy flow activity for a number of different trading strategies -- and these reports can be largely confirmed by the price activity that has been seen in stocks for both the options and futures markets. 


For long-term traders, those bodes well for bullish positions that are likely to benefit from the underlying fundamental factors that are actually driving market valuations in equities.  But for those with a short-term outlook there might be signs of concern in other areas of analytics.  Specifically, this means that chart activity on the lower time frames suggests that momentum is slowing and that immediate upside might be limited when compared to some of the other global benchmarks.  Here, we will outline some of the support and resistance levels that can be used to determine whether or not a reversal in the FTSE 100 is coming underway.

_____________________________________

FTSE 100 Stock Index

Critical Resistance:   7140

Critical Support:   6680

Trading Bias:  Bearish Reversal Potential Building

ftse.png

FTSE 100 - Stock Trading Strategy:  Prices are rolling over after hitting resistance in the 7140 area and with the indicator reading turning negative it makes sense to start positioning from the short side on the lower chart time frames.

The FTSE 100 is looking strong on a momentum basis when viewing things on the daily charts -- and fundamentally this falls in line with the market reports mentioned above, which were released by Searching Profits.  But indicator readings are starting to turn negative and this could make it difficult for the index to break important resistance levels in the next few weeks.  To the downside, the critical level to watch is 6680, and if we see a break here it will signal that a bearish reversal is underway in the FTSE 100.  Unless we see a clear break of 7140 it makes sense to position from the short side -- at least on the lower time frames.  This does not apply as much if you are positioning for the long haul but if your positions tend to last less than one month, there is little scope for upside positioning in the index.

By Richard Cox

© 2015 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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