Sell FTSE 100 as Moving Averages Converge

Talking Points

The FTSE 100 looks set to correct to the downside in the next few weeks as the index continues to struggle back to its all-time high around 7600 in early June. The FTSE still receives the odd hand-up from a weaker GBP, but the recent rhetoric from various MPC members indicates that monetary policy may tighten sooner than expected. And with oil companies a major component of the UK index, the continued weakness in Brent will continue to weigh on the FSTE.

From a technical stance, the index is becoming increasingly over-bought – trading at the 80 level on the stochastic indicator – while the FTSE also is under downside pressure as the 20-day moving average is close to breaking through the 100-day ma, a bearish confirmation. The 50-day ma, currently at 7460, should cap any upside move in the short-term.

Looking at the recent April 19 (7088) to June 2 (7600) trading range, there is Fibonacci resistance at 7481, a high not seen in the last three weeks.

FTSE 100 Daily Timeframe (January 4 – July 13, 2017)

Sell FTSE 100 as Moving Averages Converge

Chart by IG

Short FTSE 100 @ Market (Currently 7418)

Stop Loss @ 7481 (Fibonacci)

Target 1 @ 7285 (Fibonacci)

Target 2 @ 7210 (Fibonacci)

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