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FTSE: Potential Short Opportunity at 5820/30

Last updated 8/6/2012 7:21 AM EST (GMT -5) 0 Comments - Add your comment

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Fawad Razaqzada

Technical Analyst, GFT

Follow @FawadR_GFT

The FTSE is rallying towards a potential level of resistance around 5820/30. This level ties in with the high reached back in May 1 and the 78.6% Fibonacci retracement of the sell-off from point A to point B on this daily chart. If it holds firm then the index may retreat to support at 5725/30 before rising again. The trend is certainly bullish with both the 50- and 200-day moving averages rising. If we get a break above the resistance level then there is potential for another strong move to the upside. However, there is a long-term bearish trendline coming in between 5900 and 6000, which is visible on the monthly chart (inset). Keep an eye on this, if long.

But in the meantime there may be a good trading opportunity coming up. The idea is to go short at 5820 with a relatively tight stop at 5835 and a profit target at 5735, which is just above the support level identified above. But, as ever, the market does not have to reach this level in order for us to be profitable. The idea is to take partial profits along the way, moving the stop lower (in this case) to lock into a profit. Certainly, a logical level to book first profit would be just above 5800, which may turn into support, leading to a break to the upside.

For intraday analysis and trade ideas, follow me on twitter @FawadR_GFT

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About The Author

Fawad joined GFT as a technical analyst in 2010 and has since focused on timely market commentary and research for GFT with an emphasis on technical analysis. He achieved his CISI Level 3 Certificate in Investments (Derivatives – Retail) in early 2011.