The FTSE is trading sideways for now, where to target when it breaks out

Over the course of the past week the FTSE 100 has seen a nice uptrend that led the index to the 6,000 points’ area. As I mentioned to you last week the pivotal 5,800 points’ support area was not breached and as such the London index attracted enough attention to drive it higher. However what we’ve seen after the FTSE reached the 6,000-50 area is a sideways formation.

The index has been consolidating around the 6,000 points for a few days, trading either side of this level as it’s looking for fresh momentum to pick up the pace. I think we need to approach this situation from a technical perspective and understand what our targets might be in case the FTSE picks a direction and which are our trigger levels.

Before we do that though it’s important to highlight the key fundamental themes that will dictate the price action. We do have a number of important reports pending for release this week, the UK GDP levels, the US Durable Goods Orders and a few more but the really important issue that everybody is discussing is no other than the upcoming referendum on the Brexit.

It goes without saying that this is an issue that will take a toll on the FTSE’s price action in the weeks to come, especially as we move closer to the voting date and the result is still undecided. Of course stock markets hate uncertainty and most of all political uncertainty. Thus every time a key opinion-maker will make word of why Britain should exit the EU the FTSE will feel the pressure. For the time being though let’s keep our heads cool and see things from a technical perspective as I mentioned above.

I think it’s clear that for the FTSE to correct to the downside the 5,900 points’ lows need to be breached and should that be the case then the 5,800 points’ area will once again be of interest to traders as it features as the first target area. To the upside the possible extension is far shorter and I think that any gains will meet the resistance of the 6,120 points’ highs at the beginning of the month. For any scenario towards higher levels the trigger area lies above the 6,060 highs of yesterday.

alpsh
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