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I also recommended adopting a very tight stop-loss strategy, applied on momentum beneath 6450 – with an intraday low of 6314 recorded on Friday, this too has now been triggered. Although this blip beneath 6491-6556 is disappointing and likely to prove temporary, we must stick with a trading discipline. Therefore, the recommendation on FTSE again reverts to neutral.
The intraday low recorded last Friday completed a typical Gann-theory correction of 8.33% from the recent high (this 8.33% percentage line is the only addition to today's chart). As a result, the subsequent rally into the close was fairly predictable. More importantly now, however, is whether or not the index can reclaim the territory above the 6491-6556 band. If it can, we are back on track towards a target at 6922. A retest of this band – but subsequent failure to break through – would be a negative outcome. My next lower-risk trading recommendation will be guided by market behaviour following a likely retest of this key band.
The FTSE is likely to face some tough grind as it attempts to claw its way back above the resistance/support at 6491-6556. In the meantime, there are more interesting trades around.
Recommendation: Neutral. Buy on a break above 6556. The target then becomes 6922.