FTSE 100 futures reverse hard to stage bullish breakout
From dire to delightful in the space of two sessions – that’s was the rollercoaster ride UK FTSE 100 bulls had to endure late last week with futures taking out stops layered below 8152 before reversing hard on Friday, taking out the 50-day moving average and downtrend resistance dating back to the record highs set in May. Closing at the highest level since June 24, it looks like the move may extend further this week with MACD and RSI triggering bullish signals, hinting at a potential retest of the former highs.
Those looking for this outcome have a variety of setups to choose from depending on how the price action evolves on Monday.
Ideally, a retest and hold above the 50-day moving average would be the preferred setup, allowing for a stop to be placed below the level for protection. Potential upside targets include 8351.5 and record high of 8489.
For those itching to buy the breakout immediately, you could place a stop below 8300 for protection. Targets would be the same as those mentioned above. The final option would be to wait for a potential break and hold above 8351.5, allowing for longs to be established above the level with a stop below to protect against reversal. That setup would need to target 8489 to make the trade stack up from a risk-reward perspective.
Even though the composition of the indices is very different, you get the sense Microsoft’s earnings report after the market close on Wall Street on Tuesday will be highly influential on whether the FTSE sees record highs this week.
Should the bullish momentum be sustained, it will come down to the market reaction to the Fed interest rate decision on Wednesday and Bank of England policy decision on Thursday. The Fed is likely to leave rates on hold but signal a rate cut is likely in September. The BoE outcome is far less certain with markets deeming the outcome a coin flip.
With other central banks turning dovish, I suspect we may see the MPC do a RBNZ and reprioritise growth over the threat of an inflation reacceleration, delivering the first cut of the monetary easing cycle. If it does cut, the signal on the likely path for rates in the future is likely to be more influential on the decision itself, so keep an eye on Governor Bailey’s press conference.
DS
Those looking for this outcome have a variety of setups to choose from depending on how the price action evolves on Monday.
Ideally, a retest and hold above the 50-day moving average would be the preferred setup, allowing for a stop to be placed below the level for protection. Potential upside targets include 8351.5 and record high of 8489.
For those itching to buy the breakout immediately, you could place a stop below 8300 for protection. Targets would be the same as those mentioned above. The final option would be to wait for a potential break and hold above 8351.5, allowing for longs to be established above the level with a stop below to protect against reversal. That setup would need to target 8489 to make the trade stack up from a risk-reward perspective.
Even though the composition of the indices is very different, you get the sense Microsoft’s earnings report after the market close on Wall Street on Tuesday will be highly influential on whether the FTSE sees record highs this week.
Should the bullish momentum be sustained, it will come down to the market reaction to the Fed interest rate decision on Wednesday and Bank of England policy decision on Thursday. The Fed is likely to leave rates on hold but signal a rate cut is likely in September. The BoE outcome is far less certain with markets deeming the outcome a coin flip.
With other central banks turning dovish, I suspect we may see the MPC do a RBNZ and reprioritise growth over the threat of an inflation reacceleration, delivering the first cut of the monetary easing cycle. If it does cut, the signal on the likely path for rates in the future is likely to be more influential on the decision itself, so keep an eye on Governor Bailey’s press conference.
DS
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