FTSE 100: the odds of a rebound after this sharp reversal

Our chartist reruns the numbers on the City index and finds two reason suggesting a bounce should happen.

FTSE for Friday & Natura (of course) (FTSE:UKX) 

On Thursday, the FTSE 100 index dropped further than it should have and after hours futures continued the party, eventually reaching down to the 5,960 level.

This was really not great, especially as we would expected the reversal to pause at around the 6,100 point.  

We are not confident we have a clue what to expect, thanks to FTSE Futures trading at around 6,000 points at time of writing.

If the UK market opts to open for business below 6,028 points, there is a bit of a problem as we are looking at the potential of continued reversal toward 5,911 points.

If broken, secondary calculates at 5,807 points.

The FTSE 100 itself closed Thursday's session at 6,076 points, so we are laying a scenario which permits some really strong reversals.

Unlike our missive last Friday, which proved extremely successful, we are not terribly comfortable with this scenario. 

It is important to remember 'after hours FTSE Futures' can often be regarded as similar to a social media storm, something which rarely survives the cold light of day.

In addition, the UK market did two quite concise things at the close of business on Thursday.

Firstly, reversal of the UK index (not after-hours futures) stopped pretty firmly against the immediate red uptrend. Secondly, the session closed at 6,076 points, matching but not exceeding, the previous low at the end of May.

Both these details tend to suggest some sort of bounce should happen. Fans of the pedantic will have noticed the FTSE also closed 0.1 points higher than the low at the end of May. Again, a very pedantic reason to favour a rebound.

In the event a miracle occurs, and the UK market finds itself trading above 6,123 points, recovery toward an initial 6,157 is supposed to happen. If exceeded, our secondary calculation comes along at 6212 points.

To reiterate, we are not confident we have a clue what to expect, other than a Friday and some good weather. Have a good weekend.

Source: Trends and Targets. Past performance is not a guide to future performance.

News of The Bodyshop taking sides against Harry Potter author, JK Rowling, in the gender debate provoked a pile of emails, everyone essentially expecting Bodyshop shares to experience a "Ratner Moment".

There's a bit of a wrinkle in the face cream, due to Bodyshop now being owned by a Brazil traded organisation.

As for Natura, given this worldwide concern is based in Brazil and owns Bodyshop, Avon Cosmetics, and of course the Natura brand, it appears probable the Twitter storm shall pass their share price by.

At present, the company is trading at around 40 Brazilian Real, needing to weaken below 32 Real to justify raising a bush eyebrow.

Such a state of affairs risks reversal to an initial 20 Real with secondary, if broken, at a bottom of 9.5 Real.

Absolutely nothing about recent price movements suggests this is coming.

Quite the opposite in fact as above 43 Real looks capable of achieving 52 eventually, a new all-time high.

Source: Trends and Targets. Past performance is not a guide to future performance.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of interactive investor.

All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.