This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
This week you asked me for a refresher on what I wrote a month ago: Support.
A reminder of how to evaluate shares which could be due a bounce is always helpful. Although I know that what you’re really after is another trio of live examples, as fruitful as the last batch. On top of our already generous helping of daily trading opportunities?! But I’m happy to oblige, with another trio of charts. Albeit with a twist.
So I’ll kick you off with the FTSE100 itself. On Wednesday it broke down from its post-Christmas rising channel. Thankfully, the index was swiftly rescued by February rising support (6 bounces so far). The latest bounce stands at 100pt or +1.3%, with a break back above 7400.
This bodes well for the bulls among you hoping we are headed back to 7500 (another 1.3% higher). That said, some will want/need to see a break back above this week’s breached trend-line (7415) before getting back on-board. This may not be far off, but we’re not quite there yet.
Remember, support is not support until you get an actual bounce. Similarly, a breakout is not a breakout until it actually happens. Some say not until you have successfully pulled back to re-test the level for support.
As you can see from the next chart – a zoomed in version – there may be work to do yet. The breached trendline, looks to have already served as resistance. Furthermore, falling highs may be compounding this as a hurdle.
Refining the chart further, we could ask whether we are still within a short-term falling channel. One which may need another leg lower. Interestingly, the difference between recent highs of 7528 and recent lows of 7318 is a 2.8% decline. Which is quite normal in terms of pullbacks within a big uptrend.
Don’t forget the FTSE100 is up 10% so far for 2019. In fact, from its festive lows to its mid-April highs was a gain of 15%. So a 3% pullback to digest these gains is honestly nothing out of the ordinary. If anything, investors have been rather spoilt with a 5-month recovery rally from 2018 lows.
Which brings me full circle, to ask you whether the long-term uptrend is still intact, closer to resumption after a pullback?The long term chart shows you the breakdown and the bounce. The shorter-term charts highlight downtrends yet to be overcome to convince the bulls. This could mean a little more downside for the bears. whichever it is, a trading opportunity shouldn’t be far off, if not available rate now.
To stay abreast of the FTSE100 next week, get access to our Research Gold Pass. Just like our trading clients, not only will you know what the UK’s flagship equity index is doing (Bounce? Breakout? Breakdown?). You’ll also join the in receiving a generous selection of attractive trade opportunities (Support, Breakouts, Momentum, Ranges, Results, Dividends) of well-known FTSE stocks (Banks, Miners, House-builders, Pharma, and many more).
As I said last time, let us do the hard work, sifting out the best charts and trend-lines. Let us Support you in your trading endeavours
And on that note, enjoy another long weekend.
Mike van Dulken, Head of Research, 3 May 2019
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research