FTSE 100 – Correction may not be over just yet

Longer term still looking promising

There’s an interesting battle building up in the FTSE 100 UK100 ), after which we should have a much better idea of whether this rebound has legs or they’re going to be sweeped from underneath it.

The charts were starting to look quite promising. We had a clear uptrend and price broke back above the 200/233 period simple moving average band on the 4-hour chart.

UK100 (FTSE 100) 4-Hour Chart

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Then we ran into our first obstacle on the daily chart , the 55-day SMA , which is when the profit taking kicked in. This took us back below the 55/89 SMA band on the 4-hour chart where we’re now testing the 200/233 band.

So far, the 38.2 fib is holding within the first band but that doesn’t mean much yet. A break back through 5,800 would add some promise, especially if combined with a significant close above the 55/89 SMA band (4 hour chart). Obviously, that doesn’t necessarily been it’s correction over but it’s a major hurdle overcome.

UK100 (FTSE 100) Daily Chart

Given the initial trend line break , failure of 55-SMA (daily) and immediate resistance around the 55/89 SMA (4hour) band, I fear more pain may be in store for the FTSE .

This still looks like more of a corrective move but maybe one that has a little more to run. The area around the 50 and 61.8 fibs may appeal more, should the 38.2 fib and 200/233 band fall.

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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