FTSE for Friday: fresh forecasts for FTSE 100 and oil price prediction

In his weekly look at the UK's premier index, independent analyst Alistair Strang issues new target levels and also has some ideas about the direction of oil prices. 

There’s a need for a word to describe a new social phenomena. It used to be the case, when you bump into someone you’d smile and exchange the usual greetings. Nowadays, there’s a different greeting, the “ear tap” as folk frantically try to mute whatever is playing in their earpiece before they speak. 

There’s a degree of similarity with Brent crude currently, two lines converging on a chart with the market looking unable to decide what to do!

On the chart below, there’s the Red line since the gory days of 2020. The price of Brent has been struggling with this uptrend since last December, frantically trying not to break it and thus giving the markets a clue as to direction.

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And then there is the Blue line since a year ago, the artificial high blamed on Moscow but, in reality, it was a trend which commenced a year earlier when the price of crude oil managed to exceed the cost of Brent crude, pre-pandemic. While the Russia thing undoubtedly caused a spike, the uptrend was absolutely nothing to do with hostilities in Ukraine. The visuals below tell their own story.

There’s a tiny little circled area on the chart, a point where intraday traffic pierced the Red line during two sessions, but extreme care was taken to ensure the value of Brent crude closed above Red on the 8th and 9th December last year. This may be taken as early warning for future trouble, the market conceding the uptrend can be broken during a session but also extremely careful to ensure the uptrend remained in place.

The implication, should we take this as a signal for danger, is a suggestion where weakness now below just $80.7 should trigger oil to drip down to $76.5 next with secondary, if broken, at $70. We’d be inclined to anticipate a bounce at the $70 level, given such a drop ambition matches the high before the pandemic happened. There’s absolutely no logic we can suggest where this would make any sense, it’s just how things sometimes work.

Source: Trends and Targets. Past performance is not a guide to future performance.

Our alternate scenario for a gain is simply based on arithmetic.

Should Brent manage to somehow drip upwards, it now needs above $88 to suggest coming travel to $93 with secondary, if bettered, at $100.

Finally, there’s something else we need to mention. The chart visuals imply Brent crude should be forced to make a defining movement anytime in the next week or so, due to the convergence of the two trend lines. There’s absolutely no rule which demands this shall happen and sometimes, commonly with AIM shares which are awaiting important news, a share price will boringly drift through the trend lines and continue bumbling along which doing nothing useful. But in the case of Brent, should it stumble below $80.7, a short looks logical, one with a pretty tight stop.

FTSE for FRIDAY

Given the FTSE 100 has been effectively becalmed for the last few weeks,  it’s increasingly uncomfortable trying to get a feel of market direction but, as usual, we’ll give it a stab!

At time of writing, the index (always remember, we’re talking the FTSE 100, not after hours futures) is at 7,879 points, needing below 7,859 points to risk triggering reversal to an initial 7,793 points with secondary, if broken, down at 7,742 points and visually a rebound.

We're fairly relaxed at these relaxation potentials as the index needs below 7,600 points (Blue) before justifying panic. If triggered, the tightest stop loss level looks like 7,900 points.

Our alternate scenario for a market gain seems pretty straightforward, as above 7,920 looks capable of triggering movement to an initial modest 7,969 points with secondary, if bettered, a more useful 8,005 points.

Have a good weekend.

Source: Trends and Targets. Past performance is not a guide to future performance.