Bottom line:  FTSE bearish structure still remains intact with prices trading well below the 7724 resistance and potential Wave (2).

Technical Analysis:

FTSE might have completed its counter trend rally around the 7560 mark. The indice has now produced an Engulfing Bearish candlestick pattern indicating a potential reversal lower again. A high probable medium term wave counts are as follows. FTSE could be producing a higher degree Wave (3) since 7724 highs. The drop from 7724 through 7034 could be Wave 1 and the subsequent rally towards 7696 could be Wave 2 within the expected 5 waves drop as Wave (3) progresses. Further, also note that a lower degree wave I and ii might also be in place since the 7696 highs, as 7236 and 7560 levels respectively. If the above counts are correct, FTSE should remain below 7696 and ideally below 7724 levels going forward. A iii of 3 could be underway, which could be sharp and reach up to 6800 levels. Alternately, if prices manage to break above 7696, it could possibly print higher above 7724 before reversing lower again. Ideally, the 7904 resistance should remain intact since FTSE had produced an impulsive drop towards 6539 earlier. We would be required to adjust higher degree Wave (2), if the alternate count plays out. For now, most traders might be willing to initiate fresh short positions (7430/50), with protective stops above 7724 and projected targets below 7000 respectively. A break below 7200 support would confirm that bears are in complete control and the drop would accelerate towards 6800 in the short-medium term. In either of the above counts, FTSE remains a potential candidate to sell on rallies with a projected target below 6539, going forward. Watch out for a break below 7200 for the drop to accelerate.

Prepared by

Harsh Japee, Technical Analyst.

FTSE Chart

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