Technical Analysis – UK100 stock index soars above 200-SMA; gains halted at 76.4% Fibonacci

Anthony Charalambous, XM Investment Research Desk

UK100 stock index rallied above the 200-period simple moving average (SMA) on the four-hour chart and up to 7,337, reinforcing the 3-week positive picture and confirming the bounce off the 7,000 level on October 3.

The MACD is rising above its red trigger line in the positive zone, favoring more improvements. Despite the pause in the market, a bullish crossover of the 100-period SMA by the 50-period has occurred, while the Tenkan-sen line has distanced itself above the Kijun-sen line, both further backing the positive outlook. Conflicting, however, is the RSI which is currently in the overbought territory and is turning down, reflecting that the up move may be overstretched.

If the bulls manage to climb above 7,337, which is the 76.4% Fibo of the down leg from 7,440 to 7,003, the index could push higher to test the 7,388 resistance from the inside swing low of September 27. Surpassing this level as well, the two-month high of 7,440 may draw traders’ focus ahead of the July 25 and July 31 troughs of 7,461 and 7,523 respectively.

If the bears reverse the index back down off the 7,337 level, initial support could rest at the 61.8% Fibo of 7,274, while beneath that, the neighboring 200-period SMA at 7,255 could apply some pressure. Dropping lower, the 50.0% Fibo of 7,222 could interrupt the test of a more durable support region from 7,200 to 7,171, where the 50- and 100-period SMAs, the Ichimoku cloud and the 38.2% Fibo all reside.

Overall, the short-term bias remains bullish if the price remains above the 200-period SMA around 7,255.