The FTSE 100 cash index traded lower on Tuesday after it hit resistance at 7080. The slide resulted in a dip below Friday’s low of 7038, thereby completing a double top formation on the 4-hour chart. In our view, this may have turned the short-term bias to the downside.
At the time of writing, the index is approaching the 7008 level, marked by the inside swing high of Sept. 21. A breakthrough that level could open the path towards the low of the day after, at 6930. If the bears are unwilling to stop there, then a break lower may see scope for extensions towards 6843, or the low of Sept. 20, at 6825.
Shifting attention to our short-term oscillators, we see that the RSI moved below 50, while the MACD, although positive, lies below its trigger line, pointing downwards. Both indicators suggest that the index may start gathering downside speed soon, which supports further declines in the short run.
In a bullish scenario, we would like to see a rebound back above the highs of the double top, at around 7130. This will confirm a forthcoming higher high on both the 4-hour and daily charts and may set the stage for advances towards the high of Sept. 6, at 7195. If that level is taken out, then the bulls may climb towards the high of Aug. 11, at 7235.