FTSE 100 Breaks Consolidation Channel - Is a Retest in Play?

23 сент.

Friday’s price action saw the FTSE 100 break and close below a key consolidation channel, raising questions about whether a new phase of volatility is ahead. Let’s dive into the price action across multiple timeframes and explore sector performance to identify any emerging trends.

Technical Analysis:

• Daily Timeframe

Starting with the daily chart, the FTSE kicked off the year on strong footing but has been stuck in a four-month consolidation since. This consolidation range is clearly marked by the May trend high and the August spike low. For context, we’ve added the 50-day and 300-day simple moving averages (SMAs). Over recent months, the FTSE has oscillated around the 50-day SMA, but the more telling indicator is that it has held firmly above the 200-day SMA, signalling that the broader long-term uptrend remains intact.

While the FTSE may appear range-bound, that doesn't mean trading opportunities are limited. There's been plenty of momentum on both the long and short sides within this range. For instance, the recent formation of an ascending channel was pushing the market toward previous swing highs. However, Friday's break below this channel hints at the possibility of a retest of the bottom of the broader consolidation range.

FTSE 100 Daily Candle Chart

Past performance is not a reliable indicator of future results

• Hourly Timeframe

Zooming in to the hourly chart, we get a clearer view of the breakout. Following Friday’s break, today’s price action has moved back up to retest the lower boundary of the broken channel. This sets up a classic ‘break and retest’ scenario—an attractive setup for short-term swing traders looking for opportunities either to ride the downside momentum or catch the rebound.

FTSE 100 Hourly Candle Chart

Past performance is not a reliable indicator of future results

7-Day Sector Snapshot

At the sector level, there’s a notable shift that FTSE bears should keep an eye on. Traditionally defensive sectors like Utilities, Consumer Staples, and Healthcare—which have been market leaders over the past few months—have shown signs of weakness over the past seven days. Utilities and Consumer Staples, in particular, were the strongest sectors on a three-month basis, but recent softness suggests a potential shift in sector rotation. The big question is whether this is the start of a larger trend or just a temporary mean reversion within the defensive sector dominance.

UK Market 7-Day Sector Snapshot

Past performance is not a reliable indicator of future results

Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.

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