Where next for FTSE & banking sector?

by Alistair Strang from Trends and Targets |

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Our chartist looks for recovery potentials for the index, as well making sense of retail banks.

FTSE for Friday and the banks (maybe important!) 

When we last reviewed the Banks Index, we provided an argument favouring 1,896 as ‘bottom’. 

It hit this level yesterday, and has rebounded a bit. Unfortunately (as always) we have a couple of concerns worth mentioning before anyone goes 'all out' on one of the retail banks.

On the day the Banks’ Index reversed and achieved our big picture drop target level, it also broke target quite marginally, hitting 1895.37 points before bouncing. 

Normally we'd tend to shrug off a target level exceeded by 0.63 points, as it's minimal and probably a calibration error. 

Alas, there's a great ‘however’ here which dare not be forgotten. 

Both Barclays (LSE:BARC) and NatWest (LSE:NWG) managed to breach pretty important numbers, each share slithering below the crucial 100p level during Thursday’s trade. 

While neither share closed the day below this psychological level, the message was sent of 100p no longer being sacrosanct for either banks’ share price. This created a situation where we shall not be surprised to witness further reversals on these two major components of the sector. 

About the best we can hope is for the 94p level, curiously an identical possible bounce level for each bank, to be honoured in the days ahead. 

If this share price level fails to provide a trampoline effect, it becomes pretty certain our 'post Covid-19 drop' computation of 1,730 shall provide the proper bounce level for the banking sector.

Confused? You should try writing this stuff!

FTSE for Friday (FTSE:UKX)

On Thursday 17th, the FTSE 100 experienced some really strange movements and closed the session at 6,062 points. 

We shall be quite interested if the index manages above 6,085 points, as this will suggest some coming recovery to an initial 6,120 points.

If exceeded, our secondary calculation works out at a less confident-looking 6,145 points. 

Should this scenario trigger, the tightest stop loss level looks like 6,045 points, a number which appears sensible in the risk/reward stakes.

Importantly, in the event of the above coming to fruition, we shall anticipate further movement in the week ahead, ideally almost attempting the 6,400 level!

Of course, there's a potential flip side to the argument.

We'd have concerns if the FTSE finds an excuse to wander below the 6,019 level as reversal to 5,983 is expected. 

If broken, secondary calculates at 5,956 points and hopefully a bounce.

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, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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