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The UK market action for the week has been dominated by Brexit-related headlines. The UK Supreme Court nullified the prorogation order and paved the way for the UK Parliament to resume sitting.
The week started with the troubling news of the collapse of Thomas Cook, the world’s oldest travelling agency. This news, coupled with a Monday sell-off in the shares of Rolls Royce, put the FTSE 100 on a downward spiral at the start of the week. However, the market’s response to the UK Supreme Court turned things around. The FTSE 100 is now up on the week by 128 points and could push higher if bullish news continues.
Technical Analysis for FTSE100
The outlook for the FTSE100 remains unchanged, as price candles have not recorded any big moves since the last analysis piece to negate previous outlook. In the long term, price continues to remain within the borders of the up channel, even as price is forming higher lows and lower highs. The presence of lower highs on the monthly chart indicates that the upside is limited and the uptrend may be dying out.
FTSE100 Monthly Chart
On stepping down to the weekly chart to get the medium-term perspective of the FTSE100 index, we can see that the weekly candle has pulled back up in a return move to test the lower border of the rising wedge from which it broke out. Such moves after a pattern breakout are not abnormal, especially if the move occurred on light volume.
This return move is retesting the 7360.5 medium-term resistance (highs of the weeks ended on March 18, May 13 and September 20).
FTSE100 Weekly Chart
A rejection of this return move at 7360.5 should bring the 7201.1 price level (Sep 9 low) into focus. Below this level, further support is seen at 7051.7 (lows of the weeks ended Feb 26 2018 and Feb 25 2019). A further break of 7051.7 would complete the break from the up channel, and allow price to aim for the next support at 6753.2 (low of the week ended January 28, 2019).
The downward move would be invalidated if price action pushes beyond 7360.5, in which case 7525.7 (Sep/Nov 2017, Sep 2018 and April 2019 highs) might be the natural initial target.
Within the context of the weekly chart, bulls would still be looking for a break above 7360.5 to lead the way for a push towards 7525.7 (Nov 2017 and April 2019 highs). Further upside above 7527.7 would complete the breakout from the symmetrical triangle, which targets the upper channel border at the 7888.3 price level as the next target. This would complete a bullish continuation of the symmetrical triangle, in keeping with a continuation of the uptrend of the FTSE100 from 2016.
Bears would hope for a rejection of the pullback to 7360.5, which opens the door for a run towards 7201.1 in completion of the breakout move from the rising wedge pattern seen on the daily chart. This beats a path for price to approach the lower border of the symmetrical triangle at 7093.4, with potential pit stops to be seen at 7360.5 (Nov 2017 low) and 7265.0 (Feb 2019 low) below it.
Prices to watch: 7525.7 (bulls) and 7360.5 (bears).
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