Bottom line: FTSE might have completed its drop around 6450 or could be close to completing. We expect yet another low before forming a bottom.
Technical Analysis:
FTSE drops sharply as expected and discussed on February 24, 2020 when it was seen trading around 7400 levels. Looking at the lower degree wave counts, we were expecting a 3rd of 3rd wave decline that could be sharp and fast. Along with most world indices FTSE has dropped over 1000 points since 7550 highs on February 13, 2020. The lower degree counts are suggesting that FTSE might have completed wave 3 around 6540, highlighted on the chart as Fibonacci 1.618 extension of wave 1. Looking at the entire structure since 7904 resistance, FTSE could be close to completing a 5-3-5 pattern. The drop from 7904 through 6539 seems to have unfolded into 5 waves and could be labelled as (1) or (A). The subsequent rally was corrective towards 7724 and could be labelled as Wave (2) or (B). The drop since then could be Wave (3) or (C) in progress. Going further, a lower degree wave 3, within (3) might have completed at 6540/6450. FTSE could be carving a lower degree wave 4 and then proceed below 6450 to terminate wave 5. Most traders who had initiated aggressive short positions since 7500/50 levels, might be willing to take profits around current price action (6668) and remain flat. Also note that the entire drop from 7904 levels could be completing below 6450 lows. Hence it is might be a good strategy to remain flat around these levels and allow a potential bottom to be formed. Traders might be preparing to initiate fresh long positions from just below 6450 lows since a long term support trend line is seen to be passing through. (not seen on the chart view here)
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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