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The FTSE managed to finish higher on Tuesday after better-than-expected trade data out of China saw money flow into mining sectors. Anglo American climbed by 4.7% and Rio Tinto rallied 4.2% as traders bet that the recent volatility in equities was overdone.
Overall though, it was a positive session after last weeks near 3% drop. And surprisingly, London’s FTSE has managed to hold onto gains both days this week despite lacklustre performance from benchmark US indexes, which pared gains in the final hours of trading on both Monday and Tuesday.
Price action
Looking at yesterday’s price action it’s clear that the FTSE has diverged from US equities as the index found itself in positive territory for most of the day. For technical traders, the index bounced nicely off the pivot around 6320 and proceeded to move higher, eventually closing on the first resistance at 6391.
Outlook
Looking ahead, FTSE traders still have a lot to be concerned about, particularly with the shaky price action exhibited by US indices. Concerns over Federal Reserve unwinding, a slowdown in Europe, and panic over Ebola, mean that stock markets are on a delicate footing.
Optimistic traders will hope for the fear over Ebola to subside and will look to US earnings numbers to inject some life into markets.
Back to technical indicators and we continue to see the recent price action as contributing to an overall positive outlook for the FTSE.
On a daily horizon, technical indicators are mostly bullish, particularly the Elliott wave and MACD. On a 15 minute timeframe we prefer to buy in the 6304-6345 range and look for a move back up to 6420.
We are also targeting a move up to 6700 to be completed over the next few weeks in line with the Elliott wave 2 formation. However, we note that markets could end up going lower over the next 1-3 days.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
