Bottom line:  FTSE bearish structure is expected to remain intact until prices stay below 7724 levels, but it needs to break below 7100 to accelerate towards 6560.

Technical Analysis:

FTSE remains in control of bears in the medium to long term, with prices staying below the 7724 resistance. As discussed last week, FTSE found resistance around 7500/50 levels and reversed sharply lower. Looking at the immediate structure, FTSE should break below 7200 and 7100 levels to keep bears in control. Going by the potential short term wave counts labelled here, the indice could be unfolding a lower degree Wave iii within Wave 3 of Wave (3) lower towards 6560 levels. If the above counts are correct, prices should ideally stay below 7696, and produce a sharp drop towards 6500 levels, going forward. Alternately, a push above 7696 would challenge or print above 7724 levels before reversing lower again. In either case, it is critical for prices to stay below 7904 levels, to keep medium to long term bearish structure intact. Looking at the larger picture again, FTSE had dropped from 7904 through 6539 in an impulse, labelled as potential Wave (1) of (A). The subsequent rally towards 7724 was corrective and labelled as Wave (2) or (B) here. If the above larger degree counts are correct, a Wave (3) could be underway against 7724, and is unfolding into lower degree wave counts. For the above described structure to remain intact, a break below 7200 and subsequently 7100 is required. Most traders might be willing to remain short from 7550 levels last week and also might be looking to sell further on pullback rallies, with protective stops above 7724 and potential targets below 6560 levels respectively. Watch out for FTSE to break below 7100 for the drop to accelerate further.

Prepared by

Harsh Japee, Technical Analyst.

FTSE Chart

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