Neutral FTSE recommendation intact

Price at time of writing – 6755

With the FTSE having breached 6556 (since my last update on 6 May), short positions opened at my former target of 6491 have been stopped-out. In the absence of a lower-risk entry level, my neutral recommendation on the FTSE continues for the time being.

While acknowledging that the  FTSE has unfinished business to the upside (my next target remains 6922), now is not the time to buy the index. The Relative Strength Index (RSI) remains extremely overbought and is bound to unwind in due course. Furthermore, the 167 points required to complete the move to my next target equates to a percentage gain of just 2.47%. This is not sufficient reward to warrant the high-risk profile of opening a long position today. Indeed, now is the ideal time to start preparing an orderly exit from the market. As the FTSE moves to complete this target, we are likely to see some notable sector divergence. For example, the banking sector appears poised to lead the way in the FTSE's final advance towards 6922. 

The question remains as to what path the FTSE takes to complete its move to 6922. If it moves directly to this target, we will miss the final move. If it corrects sufficiently prior to fulfilment, we will grab the opportunity and buy the index. With the index having completed a minor 8.33% advance from its recent low last night, there remains every chance an opportunity will still present.

Recommendation: Neutral. Buy the index on any fall to 6556. The target remains 6922.

Random holding chart

 

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CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.