FTSE 100 hits a downside line and slides
|The FTSE 100 cash index traded lower today, after it yesterday hit resistance at the crossroads of the 5710 level and the downside resistance line drawn from the high of February 20th. As long as the index continues to trade below that line, we would see decent chances for the bears to take the reins again.
That said, in order to get confident for larger bearish extensions, we would like to see a decisive break below Monday’s low, at around 5330. That level was also a decent resistance between March 17th and 20th. Such a dip may set the stage for declines towards the 4831 territory, which provided strong support from March 16th until March 23rd, or towards the 4720 barrier, defined as a support by the low of August 2011. Another break, below 4720, could extend the slide towards the 4522 zone, which acted as a strong resistance back in May and June 2009.
Shifting attention to our short-term oscillators, we see that the RSI fell slightly below 50, but turned up again, while the MACD, although positive, lies below its trigger line. Both indicators suggest that the index may start gathering negative speed again soon, but the fact that the RSI turned up enhances our choice to wait for a price-dip below 5330 before we get more confident on that front.
In order to start examining the bullish case, we would like to see a strong break above 5830. Such a move would confirm a forthcoming higher high and may signal the break above the aforementioned downside line. The bulls may then get encouraged to climb towards the 6240 obstacle, marked by the high of March 10th, or the low of March 6th, at around 6400. If they don’t stop there either, then we may see the advance extending towards the 6600 level, defined as a resistance by the inside swing low of March 5th.
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