FTSE bears remain in complete control as they managed to print 6000 levels before pulling back. The indice is trading close to 6180 as we prepare to publish this update and should be looking to resume lower again.
Let us look at the potential wave counts since FTSE carved a lower top around 6500 levels earlier. The drop between 6500 and 5929 can be clearly sub-divided in to 5 waves, making an impulse wave. An impulse wave is usually followed by a corrective wave.
FTSE had rallied towards 6355 levels in 3 waves, labelled as a-b-c here. Potential Waves 1 and 2 seem to be most likely in place. If the above structure is correct, FTSE should ideally remain below 6355 and head lower towards 5900.
Also note that Wave 2 had reached just above the fibonacci 0.618 retracement of Wave 1. This is a typical guideline of the Wave Principle; Wave 2 never retraces more than 100% of Wave 1. As an alternate, Wave 2 might have terminated 6330.
Either way, FTSE is most likely on its way towards 5900 over the short term. A break below 5900 would also confirm with respect to price action that the indice is setting up for a continued bearish reversal and it remains a good candidate to be sold on rallies.
Going further, FTSE has also broken below its counter trend line and prices are testing the backside, which should act as resistance. Overall, FTSE remains bearish until prices stay below 6500 mark. Most traders might have initiated short positions with risk above 6600 respectively.
Technical Analysis Team
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