FTSE 100 Analysis: Rebound Doesn't Rule Out Negativity

FTSE 100 continued to trade higher for a second consecutive day on Wednesday. Global equity markets staged a rebound as trade tension between the U.S. and China eased. Media company WPP and aerospace giant Rolls Royce led the advance, gaining 5.40% and 4.92% respectively. Investors were cheerful after Rolls Royce stated annual profits and cash flow were to come in towards the upper end of its guidance range. At the other end of the spectrum, Wood Group and Sainsburys were down 8.32% and 4.93%.

In the technical space for the FTSE 100, bear themes remain intact despite the recent rebound. After a downside breakout of the symmetrical triangle pattern, prices rejected the 50% fib level of the 2016-2018 bull market and have since rallied higher. The benchmark index has broken above the 6,861 resistance level but may find trouble to continue higher from a flurry of technical factors, namely nearby fibo level and moving averages.

Trending studies continue to reinforce bearish pressures as 50/21-DMA’s are trending south. Prices may find resistance from the 21-DMA if the index were to rally higher. In addition, the up sloping trend line may prevent the FTSE from advancing further. This would form a pullback, and a rejection may suggest deeper downside risks.  

Momentum studies also remain negative. The RSI has advanced through the 50 level, nearing its downtrend line. This has held strong before, and a rejection would confirm negative pressures. The ADX is above the crucial 25 level, and the DI’s are converging.

The FTSE 100 continues its bearish stance. Trade tensions between the U.S. and China will probably fizzle out. Markets have rallied on little progress only to be disappointed from escalations. Moreover, Brexit and political turmoil in UK will keep the pressure on UK equities.

© Akif SH. Din, AGORA-direct Limited, 12/12/2018

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