Interactive Investor

FTSE for Friday: why the blue-chip index is not out of the woods yet

23rd July 2021 07:57

Alistair Strang from Trends and Targets

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Despite a recovery from Monday's slump, the FTSE 100 index must do more to restore confidence in the uptrend.

We heard the weight of international laughter, when last week's FTSE for Friday report fell apart as the index opted to wander all over the place. As suspected, the market indeed bounced from the 7,000 level once again, wandered about like a drunk football fan who’s lost his pals, then closed the session once again at the 7,000 level. Nothing about the day's trading inspired any confidence, the lacklustre performance paving the way for a truly foul “freedom day” as England allegedly returned to normality.

However, there are a few details worthy of mention.

The notorious uptrend since October last year remains valid. The market has broken this uptrend, requiring to close a session above 7,030 points to nonsense the trend break. At time of writing, the FTSE needs better than 7,062 points to regain the Red uptrend and give confidence for surprise growth. Until such an event, the Big Picture suggests the FTSE 100 is now loitering in a region where reversal to 6,675 looks possible and, if broken, ‘bottom’ calculates around 6,500 points.

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

As for the near term and the FTSE for this Friday, we dare not disregard the market open on Thursday as it proved fascinating. The FTSE experienced a downward spike at the open, often a reliable signal of good things ahead. Both France and Germany were better behaved, opting to head upward directly from the market open and we watched, with fading hope, for any sign the UK intended match Europe.

Obviously, it failed to happen, with the result that the FTSE experienced a pretty boring day, one which failed to exhibit any reasonable degree of upward strength. Worse, thanks to the market breaking its immediate uptrend, there’s a very real risk reversals shall prove traumatic.

Near term, below 6,955 threatens travel down to an initial 6,915 points. If broken, our secondary works out at 6,890 points. And, if triggered, the tightest stop is painfully wide at 7,003 points.

Our alternate scenario can be pretty straightforward, as above 7,003 calculates with the potential of 7,022 points. If bettered, our secondary is at 7,047 points.

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. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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