Monday, July 23, 2018

Two scenarios for the FTSE 100

  • FTSE 100

Looking at our charts at the start of the week we notice a very interesting pattern forming on the 1-hour studies for the FTSE 100. The UK index has been trading within an ascending triangle for the past month or so, posting higher lows but failing to break above the ceiling of 7,700 points. As the trading range is becoming narrower by the day, the odds in favor of a breakout are mounting. Investors hate seeing an ever decreasing margin for profit so any day now they will be forced to bet on a direction.

So what are our scenarios in case of a breakout? First we will examine the bullish case: a break above the 7,700 points' barrier will attract buying momentum and traders will join the fray to take advantage of this opportunity. The targets in this case are easily found by looking at the left side of our chart below and are located at the 7,800 and 7.900 points' levels. Nice round figures that coincide with the previous highs for the FTSE 100.

On the flip side, a downwards break of the ascending trendline will signal that sellers have taken the upper hand. The bulls will be forced to cut their buying positions on the index and possibly take the other side of the trade. In case of a bearish break of an ascending triangle, the immediate and short-term target is always the “base”, the lower level of the formed pattern. In this case, this level is found at the 7,500 points' area, another nice round number to target.

FTSE 100 triangle