Bottom line:  FTSE bearish structure to remain intact until 7700 resistance holds. It seems to have carved an intermediary bottom at 5160 levels today. .

Technical Analysis:

FTSE bears remain firmly in control since 7700 levels earlier, but it might have carved an interim bottom around 5160 levels today. In the short term, a pullback rally could materialize towards 5900/6000 levels, before resuming lower again. If the drop continues from here, 4700 could be the next potential target for bears in the short term. Looking at the wave counts since 7904 highs, FTSE might have carved a larger degree Wave (1) or (A) around 6539, followed by Wave (2) or (B) termination around 7724 levels respectively. Wave (3) potential termination was around the 5500 mark but it has extended towards 5160 mark until now. Please note that Wave (3) would ideally travel up to fibonacci 1.618 of Wave (1) as highlighted here, around the 5500 mark. Since prices have dropped past 5500 mark, it could be possible that Wave 3 of (3) is an extension and might still be progressing. If the above counts are correct, FTSE might be close to terminating Wave 3 of (3) around 5000/5100 levels, before producing Waves 4 and 5. Traders might be willing to take some profits on the short positions taken earlier around the 5000/5100 mark and remain flat. If FTSE terminates 3 waves from 7904 highs, the drop would be corrective, indicating a fresh rally to resume higher over the next few months. Alternately, if we witness a 5 wave drop from 7904, it would confirm that the drop is incomplete and FTSE could dig further low after producing a counter trend rally. It remains to be seen if the drop completes into an impulse before traders might initiate fresh long to play the counter trend.

Prepared by

Harsh Japee, Technical Analyst.

FTSE Chart

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