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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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FTSE plunges to 200 day moving average and trend line

Article By: ,  Financial Analyst
January 27, 2014 3:15 PM

January 27, 2014 – The FTSE 100 dropped substantially last week (see daily chart below) after hitting a high of 6867 by mid-week, which fell just slightly short of May’s 6876 multi-year high.

These two highs were so close that they could be considered a double-topping formation, and the price area of 6867-6876 may be considered exceptionally strong resistance.

After hitting the second top last week, the index has since fallen precipitously to break down below the 6650 level and the 50-day moving average.

It then went on to fall further today to hit both the key 200-day moving average as well as a major uptrend line extending back to the mid-2012 lows around 5225.

 


At the current time, the pullback constitutes around a 4.5% decline: not yet enough to qualify as a full correction. In addition, the FTSE is still within the confines of a strong, long-term bullish trend.

If a recovery of the current pullback occurs, this trend will have remained strong and unbroken. In this event, the major upside target resides around the noted 6867-6876 double-top resistance once again, followed by the 6950 all-time high (established at the end of 1999).

If, however, there is a strong breakdown below the 200-day moving average and the uptrend line, there could be a strong case for a full downside correction, with key intermediate support levels around 6350 and 6200.

 

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