Is the trend still our friend on this U.K. stock index?
Or has the uptrend reached the bend at the end?
Here’s a major reversal pattern forming on the daily chart of FTSE 100:
FTSE 100 (UK100): Daily
After a couple of failed attempts at breaking past the 7,600 level, this equity index is back to testing the neckline support close to the key 7,000 area.
Will it break or will it hold?
A breakdown could draw more sellers’ eyes and trigger a long-term reversal, possibly lasting by the same height as the double top formation.
On the other hand, a bounce might keep the sideways price action going and put the FTSE 100 index back on track towards the 7,600 resistance.
Technical indicators aren’t giving very clear hints at the moment, although there are some signs of a bearish turnaround.
For one, the 100 SMA is inching closer towards making a downward moving average crossover from the 200 SMA. Now that might be a big green light for sellers!
Stochastic still has some room to head north before reaching the overbought area, so the index might follow suit. However, the oscillator is also close to reflecting exhaustion among buyers pretty soon.
The 200 SMA seems to be doing a fine job at keeping gains in check, so I’d watch out for how price reacts to these dynamic inflection points, too.
