When I wrote these lines, the FTSE 100 was at 6,595.88 points. This mean the index is slightly above the opening in March 2020 and that we may have seen a double bottom done in March – April and October – November. You can see it if you set your chart with monthly candlesticks.
We are writing before Sunday, December 13, in which we may have big news about Brexit. Whether it is going to be positive or negative, we cannot know, but the rises in the last two months suggest it is going to be positive.
However, the approach we are going to use is one of technical analysis, and we are going to ignore any fundamental factor that may arise, not because they are not important, but because we believe the market is wise and takes fundamental factors into consideration before we can know them.
So, what are the levels?
The next objective for the index is 6,800 points, which means a potential profit of three percent. This level is not randomly chosen. If we look at the monthly chart, we will see that the index made a resistance at it for more than a year between October 2013 and January 2015. Then, it was surpassed in February 2015 to be followed by an important correction that made the trough reach around 5,550 in February 2016. After that, the index went back to the rises to go beyond 7,750 in December 2017.
Also in December 2018 and January 2019, the correction fell slightly below the 6,800 level. This confirmed the importance of the number. What was a resistance became a support.
Now we are below it, and we think the old support can become a resistance again. If it is finally surpassed, we could expect to reach the 7,600 level; but for now, we do not dare to dream about it.
If we look below, the first support is at the 6,000 level, and the next and most important one is at 5,500.
Our prediction
We think that the FTSE 100 will visit the 6,800 level before the end of the year. Besides, in the monthly chart, we can see that the signal line of the MACD has triggered a buy signal.
We do not think it is time to enter though because the stop loss should be at 6,200 – 6,150, and the potential loss (6.4 percent) is bigger than the profit we would get with the target of 6,800.
As usual, we do not pretend to give investment advice here. This blog is just a personal opinion with the intent of entertaining the reader and maybe helping them to have another opinion. If you need advice, please ask a professional financial advisor.
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