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FTSE 100: Persistent Rise Impressive, but Dip Risk Growing

FTSE 100: Persistent Rise Impressive, but Dip Risk Growing

by Paul RobinsonJanuary 5, 2017

What’s inside:

  • The FTSE 100 continues its persistent rise into record territory
  • Risk/reward not great for new longs, but shorting isn’t viewed as a great option either
  • Pullback/consolidation phase will do the market some good

The FTSE 100 continues to walk itself further into record territory after recently breaking out above the April 2015 all-time closing high and October 2016 intraday high. The trend since the 12/2 low has been extremely persistent, with the FTSE having risen 17 out of the last 20 sessions. The only real opportunities to enter the market from the long-side have come on shallow intra-day declines.

As far resistance goes, there are obviously no price levels to reference when in record territory. But with that said, we can look to sloping lines as potential forms of resistance. One we have our eyes on with further strength, is the trend-line running higher off October 2015 peaks over the October 2016 high; this line lies in the area of 7280/300.

The continuous rise with no pullback does present an increasingly risky proposition for those looking to establish new longs, but doesn’t hold anything good from a risk/reward perspective for shorts, either. The market looks like it could be nearing a point where a shallow decline or consolidation phase take hold, but should find support initially on a decline into the 7130/04 zone, the prior intraday and closing record highs. As long as price action remains constructive – shallow pullbacks/consolidations – we will continue to view the FTSE as a buyer’s market. To flip the script on the bulls we will need an aggressive reversal event and downside levels broken before sharpening our knives from the short-side.

FTSE 100: Daily

FTSE 100

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