Is FTSE Set To Test 5000?

With Wall Street closed today markets have reverted to holiday mode. Traders have taken advantage of this to test the bulls’ enthusiasm for another surge higher.

Today I’m taking a look at one market that I follow closely and another which I know little about, but which might just get interesting.

FTSE
As traders returned from their summer villas, last week witnessed the start of the long-awaited sell-off in shares. The US and European markets crashed below key supports, signalling a turn in sentiment. But even though the FTSE fell in value, crucially it alone held firm at the 21-day moving average. The RSI remained steadfastly above 50, leaving the index well-placed to push higher once the froth was blown off other stockmarkets.

Putting aside concerns in the real world, the FTSE looks odds on to replicate August’s bounce and re-test the high of 4943; a break of this level could see a turbo-charged 50-point rally to have a close look at 5000.

I think the index looks pretty secure in its own right, but if China wakes up with a migraine and other markets fall in sympathy, then we could see FTSE back-peddle to the 21-day MAV at 4800. Only a confirmed break below the moving average will make for an interesting look at the downside.

Ryanair
OK, I know little about Ryanair, other than it’s the only airline to charge for life-jackets in the event of an emergency. However, glancing at the chart after Air Lingus’s latest traffic figures, I thought it was worth sign-posting a more positive change in sentiment.

Friday’s move took the price back above the 21-day moving average, setting it up for a better start to the week. Today has seen the price breach both the 50-day, and the 200-day, moving average with a rising RSI back above 50.

The market looks set to test August’s high of €3.28, and if traders get a feel for it the price could make a push for July’s €3.40 and then June’s €3.86. The key test first of all is to establish base camp above the 50-day moving average; note that the last four attempts have failed within a day!

It’s worth being aware that this isn’t necessarily a good week for backing airlines. Previously markets have remained wary of anniversary copy-cat attacks which, and any rumour flying around could have a short-term damaging effect on the share price. If the price is unable to hold the 50-day MAV then I’d look for a quick re-test of the 21-day MAV, which is too flat to confirm a trend, and then nose-down for €3.

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