Bottom line: FTSE bearish setups remain intact until prices stay below 7724, which is marked as potential Wave (2) here.
Technical Analysis:
FTSE bulls have managed to re-test the 7690 highs print on December 27, 2019. The recent high is just a few points higher at 7696 and is expected to hold below the 7724 mark. The short term wave structure/counts suggest that 5 waves might be complete between 7130 and 7696 respectively. This rally could be marked as wave c, within the a-b-c corrective rally since 7034 lows earlier. The medium term wave structure still remains constructive for bears with lower degree waves 1 and 2 finally in place at 7034 and 7696 respectively. For the above structure to hold true, prices should remain below 7724 levels, which is higher degree Wave (2). The long term structure is also falling in line with a bearish view. The drop between 7904 and 6539 was seen in 5 waves marked as Wave (1) or (A). The subsequent rally towards 7724 was seen in 3 waves, marked as Wave (2) or (B). Please note that the above structure is a classic 5-3 Elliott Wave pattern, which should produce yet another 5 waves lower. If FTSE moves as discussed above, prices should ideally stay below 7904 going forward and unfold into 5 waves as Wave (3) or (C) progresses further. A safe trade setup would be to look for opportunities to sell at higher levels. Looking into the risk-reward ratio, it is good to initiate shorts against 7724, with a potential downside target below 6539 respectively. A break below 7500 would confirm that a meaningful top is in place at 7696 and bears would remain poised to print lower lows. Conservative approach would be to allow prices to break below 7500 support and then sell on counter trend rallies.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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