My best estimate to the current trading range has been defined as 6556-6922, and I have been looking for a test of either end of the parameters before deviating from my neutral stance. It appears we may finally be getting such an opportunity.
Friday's fall has taken the FTSE 100 to within 27 points of triggering my recommendation to buy the index at 6556. Indeed, crafty CFD traders have already been offered this buying opportunity during today's Asian trading hours. To be precise, the support is actually a 65-point band between 6491-6556 (6491 being my former minimum target). Despite attempts by the media to convey some economic gloom, we must remember that only a break beneath 6491 would heighten the risk that the recent pullback is anything more than healthy profit-taking.
Today's chart returns to display the shorter-term profile. Adding strength to the support building at 6491-6556 is the presence of the rising 50-day moving average. Furthermore, we finally have a relative strength index (RSI) reading that has unwound all the overbought tendency of the past few months. Overall, the risk to buying index has now been lowered, and preparations to resume 'long' positions should be underway.
Recommendation: Buy at 6556. Target 6922. Stop-losses can be activated on a fall beneath 6450.