UK 100 – Double Top Remains in Play

The UK 100 has started showing some weakness over the last week or so after failing to make a significant new high for a second time in the space of a week.

Since then, the ascending trend line – 24 June lows – has come under some pressure, firstly on Thursday when a late recovery ensured is closed the day above the line, then again today.

FTSE Daily

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As far as today is concerned, we have once again seen a bounce from the early lows but I’m not convinced that the index is bottoming out for a couple of reasons.

OANDA MP – Indices Continue to Struggle (Video)

The first is how the UK sold late into the close on Friday, which possibly suggests that traders that bought the dip didn’t have the confidence to hold it over the weekend. This kind of behaviour is not exactly consistent with confidence in the ability to break to new highs.

The second is that following the two failures to make new highs, a double top was formed and the neckline broken. While we did trade back above the neckline on Friday, it never took out the double top highs and so in my view, it remains in play.

FTSE 4hr

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Based on the size of the double top, we could still see a move back towards 6,875 which would mean the index has made lower highs and lower lows and the trend line has been broken.

At this point, it could find support from the 55-day simple moving average but further losses may well follow. The next notable support level could then be found around 6,775-6,800 followed by 6,650 and 6,615.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam