FTSE 100 and Sirius: What the charts are saying

FTSE 100 for Friday (FTSE:UKX)

We’ve quite a lot of optimism for the marketplace currently, thoughts which we intend to cover when our outlook for next week is published.

The brief version is, assuming Friday doesn’t spoil things, the underlying market trend is upward and short positions should probably fail, given the index is officially achieving higher highs.

To break the immediate uptrend, the FTSE 100 (UKX) requires to break below 7,400 currently. Unfortunately, this obviously provides a hysterically silly stop position if taking a long position.

Near term, above 7,567 and we expect growth toward 7,584 points initially. Secondary, if bettered, comes in at a very probable 7,608 points.

If searching for a short position, there’s a tentative scenario where weakness below 7,490 is supposed to bring 7,474 points initially. If 7,474 breaks, there’s a chance the upward pressure is easing and travel down to 7,444 will make sense.

Of course, we can use the chart picture below to resort to “accepted” terminology, as it’s clear the index has broken above a prior downtrend with the result a bunch of folk will be waiting for it, “back-testing-the-trend”.

Generally, if this sort of nonsense is going to occur it will happen once any upward surge achieves (and betters) a target. In the case of the FTSE, we’ll start looking for short possibilities once 7,608 has been achieved.

Sirius Minerals (LSE:SXX)

With some shares, the temptation to open the drawer in the coffee table and extract all the coloured pens (hidden between grandchildrens’ visits) can prove difficult to resist. Sirius Minerals (SXX) – aka the flatline share – is a case in point as it’s doing nothing interesting. Presumably some news is awaited?

The reason for the crayons is quite easy to explain. Firstly, the market is quite boring currently, with many shares just mucking around. Secondly, we need to figure out if a share price is about to collide with a trend-line and suffer some forced movement.

With Sirius, the major downtrend (the dark blue dashed line) is at 28.253p currently. If the price somehow betters this line, it scuppers any arguments favouring 21.5p providing a bottom on the current movement cycle.

But to make things more enjoyable, there’s the downtrend since June 2017. It’s currently at 25.987p and we’re fairly sure the price need only better this level to indicate some considerable change in mood.

The tea leaves indicate that near-term moves above 26p should provoke an initial 28p, challenging the dark blue dashed trend. At this point, our logic demands the share price actually close a session above 27p and achieve our favourite “Higher High” criteria.

In the case of Sirius, it’s easy to imagine dance steps during October provoking further growth toward 33p which visually, appears perfectly viable.

Given the share price is currently loitering with intent at 25.79p, it certainly does not require much work to kick itself into life.

To finish with our customary note of caution, below 24.5p would again give concern as it suggests a visit to 21.5p and hopefully a bounce. We’d be extremely concerned should the dashed red line be broken, currently 20p. It allows weakness to 9p to enter the picture.

In summary, there are quite a few indicators hinting this wants to move soon, despite the last few months lethargy. Visually, we’d not permit excitement for the future to enter the frame unless the share price now closes above 36p. In such a case, a cycle to 53p commences.

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.