FTSE 100 Technical Analysis

Tuesday, 20th August 2019 12:54 - by Rajan Dhall

The technicals seem to be working a treat on the indices at the moment with the trade war sell-off stopping right on the weekly support zone of 7099.4. Now things seem to be simmering down between China and the US we have seen a retracement back to 7218.2. On the weekly chart above, it seems we are not out of the woods just yet as a lower wave high has been created. But until 6544.0 gets taken out to the downside we will not get a confirmation of a lower high and lower low formation and we are pretty far from that at the moment. The other thing worth pointing out is the Stochastic indicator making a lower high while the price waves made a higher high. This is called divergence and can indicate a slow down in momentum for the uptrend and some bearish price action in the longer-term. 

Below is the daily chart. This gives us a zoomed-in view of the price action. This chart is still in an uptrend but is not overly bullish either. For me, a conformation if a trend continuation will come if 7361 breaks to the upside. Very often price breaks a trendline and it often comes back for a test before a move lower and this could be whats happening at the 7361 level. The indicators, however, are hinting we may be looking at a move higher. The MACD at the bottom may have the histogram in the red but the moving averages are converging to a bullish cross over. The Stochastics are also looking to pull away from an oversold zone. They made a higher low when the price made a lower low which is bullish and has already had a bullish cross. So in the short term, we may be looking at more upside potential but on the higher timeframes warning signs are there.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.