Interactive Investor

FTSE 100 - Friday analysis

27th May 2016 09:44

Alistair Strang from Trends and Targets

We're finishing for the Monaco Grand Prix weekend with a near-term look at the FTSE 100 for Friday. The week started with us suggesting 6,265 would make a sane ambition for the market and thankfully, courtesy of an up week (so far) the FTSE obliged, hitting our target repeatedly on Wednesday and finally bettering it on Thursday.

As a result, we can imagine further growth toward our longer-term projection of 6,350, which means we must look at near-term trigger levels.

While above 6,281 - the high of this week - is obviously going to be viewed as a trigger, we're interested if the FTSE (not after-hours futures) trades above a near-term 6,269, as growth to an initial 6,286 calculates as possible. From our perspective, this will be quite a big deal, as the suggestion if 6,286 is bettered will be of implicit strength for the near-term.

The approach illustrates some of the dangers which come from relying only on "higher highs" and explains why we will occasionally offer a trigger level which visually makes little sense.

In the event 6,286 is bettered, we are able to wax lyrical about further growth to a near term 6,306 with secondary 6,336 - sniffing distance of the attraction from 6,350 longer term. But, if we judge strength on the last few days, it's unlikely even 6,306 will be bettered.

In terms of "where's the stop", best guess is somewhere below 6,245 if we work on the last three days. More realistic is, unfortunately, at the red line on the chart below - 6,200 points.

Oddly enough, if you intend to hold out for the 6,350 (and above) ambition, any stop needs be at the dashed pink line - 6,102 currently - as the force for growth to 6,350 has been generated by movements since February.

In fact, these movements even calculate with an amazing longer term target at 6,675. We're inclined to treat this with considerable caution until the markets actually trade in the 6,400s, as the visuals suggest some stutters await at such a level.

Of course, as usual we're heading toward a Friday loaded with optimism, especially as we've a Holiday Monday lying in wait. So we must ask where the tripwires are waiting.

Anything near-term below 6,239 looks capable of slight softening toward 6,225 initially, with secondary a less comforting 6,210. Our dislike of the secondary is due to it taking the markets into a region where a further 55 points can be lost in a blink to 6,155, effectively interfering with the longer-term February uptrend.

Hopefully, the weather remains pleasant for the coming weekend. In honour of a friend who is visiting, we're not having a Monaco GP drinking game. He recently checked and his ban from the principality remains valid. For some reason (red wine) he was part of a group who thought mooning the TV cameras a giggle...

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Over the past few weeks we’ve been highlighting a "Near Term Potential Trade" or, as we call it - an Oddball. Shares being monitored are all FTSE 350 members as we're looking for logical movements. Interactive Investor, kindly, are featuring these reports on their website and then we're also publishing them atthis link.