Is UK’s FTSE 100 Set to Drift Further North?

The FTSE 100 cash index moved higher yesterday, breaking above the key resistance (now turned into support) barrier of 7142, marked by the peak of August 4^th. The move has confirmed a forthcoming higher high on the 4-hour chart and combined with the fact that the price is trading above the upside support line drawn from the low of July 19^th, paints a positive near-term picture.

In our view, the move above 7142 may soon result in a test at 7218, a resistance marked by the high of June 16^th, the break of which would take the index into territories last tested in February 2020. The next resistance may be the round figure of 7300, where another break could open the path towards the inside swing low of February 18^th, 2020, at around 7350.

Taking a look at our short-term oscillators, we see that the RSI lies above 70, but it has just ticked down, while the MACD lies above both its zero and trigger lines. Both indicators detect strong upside speed, which supports a trend continuation, but the fact that the RSI has ticked down makes us cautious over a possible retreat before the next leg north.

In order to start examining a bearish reversal though, we would like to see a dip below 7090. This will confirm a forthcoming lower low and perhaps validate the break below the aforementioned upside line drawn from the low of July 19^th. The bears may initially target the 7050 barrier, marked by the low of August 2^nd, the break of which could trigger extensions towards the low of July 30^th, at around 6994. Another break, below 6994, could carry larger bearish implications, perhaps setting the stage for declines towards the low of July 27^th, at around 6925.

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