(MENAFN- DailyFX) FTSE Technical Highlights: FTSE catapulted to new record highs, but don't get too excited Top-side trend-line to keep a lid on market at the least A big-picture scenario could unfold in the weeks/months ahead Check out the to find out what is driving the FTSE and GBP .
FTSE catapulted to new record highs, but don't get too excited
Yesterday, the FTSE traded to a new record close, and in the process, it hit a top-side trend-line extending higher since June. Top-side trend-lines, even at record levels, have been known to put a cap on advances, sometimes only briefly, and at other times these resistance lines have proven to be rather formidable.
For now, we're looking for a pullback (which is already beginning today with risk sentiment wilting a bit). The first level of support arrives just under 7800, where the prior record high is situated, along with the very steep trend-line off the March low.
It would be a rather shallow pullback, but if the footsie is to continue its impressive run the market might quickly find buyers to keep the index propped up for a period of consolidation.
It would seem a deeper pullback is likely, though. The vertical rise is in need of a meaningful correction, which would likely lead to a decline below the prior record, perhaps down towards the 7600-area. If this is to be the case, then short-term traders are about to gain the upper hand from the short-side.
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FTSE Daily Chart (Top-side t-line resistance) A big-picture scenario could unfold in the weeks/months ahead
Pulling back to the weekly chart, there is one long-term pattern taking shape starting back a year-ago. A reverse symmetrical triangle, or ‘RST' for short, may be forming with this most recent plunge and extension to new highs. Some of you may know the pattern as a 'megaphone.
Whatever you call it, the idea behind these patterns is that the expanding price action indicates a period of major indecision. These can resolve themselves as tops or continuation patterns. Typically, a meaningful pullback develops (hence part of the reason leaning towards a relatively deep decline from here), then if the market fails to turn back around the market undergoes a major decline.
If it can turn around with momentum after a pullback and break through the prior high another sizable leg higher is in the works. In either event, we have some time to worry about the big-picture pattern, we'll discuss it when it becomes relevant. For now, the FTSE looks poised for weakness.
FTSE Weekly Chart ('RST' Pattern Could Be in the Works) Tools for Forex & CFD Traders
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---Written by Paul Robinson, Market Analyst
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