Is This the Time to Buy the Dips?

Nigel Frith

Market jitters have left many reconsidering their risk appetite. Nothing is ever certain; however, given the evident temptation to buy the dips, there are some obvious places to look for clues indicating whether that time is now.

Equity markets have started the week underwater. At the open in London, the FTSE 100 was 0.50% lower than Friday’s closing prices. News reports over the weekend pointed towards political events that might slow down the roll-out of Covid-19 vaccinations in the EU and UK. Stalling the return to regular economic activity by up to three-months would be wounding. It would also hint at a gloomier political climate for years to come.

More information on the EU’s approach will be released on Thursday when EU leaders hold a virtual summit. Until then, support for the idea that this might be an opportunity to buy the dips can be found on the other side of the Atlantic in the soothing words of US Fed Chair Jerome Powell.

Powell’s statement, which was delivered last Wednesday, stated that interest rate hikes in the US currently look unlikely until 2013. Instead, policy measures will focus on boosting the sectors of the economy that are still struggling rather than reigning in those that are over-heating.

 

FTSE 100 – Monthly Candles – Fib Retracement and 100 SMA

Source: IG

Could this be the time to buy the FTSE 100?

The FTSE 100 has lagged the S&P 500 and Nasdaq 100 indices over the last 12 months due to the US versions holding far more tech stocks which look likely to benefit from the ‘new normal’. There was news on Monday that the London benchmark may be becoming more tech-friendly. Food delivery service firm Deliveroo confirmed its IPO on the London Stock Exchange will be within a price range of £3.90 – £4.60 per share. Some will baulk at the valuation, especially considering the firm is yet to turn a profit, but the London market has been desperate for more listings of stocks with a higher risk-return profile.

The FTSE’s monthly chart has a 76.4% Fib retracement at 7002, some 300+ points higher than current price levels. The monthly 50 SMA also sits in that region at 7012.

The 100 month SMA (currently at 6791) has been a significant barrier to upward moves. Each of the last three monthly candles shows price breaking higher than the 100 SMA to only retreat by month-end forming a bearish gravestone candle.

Follow the Dollar

As ever, the US dollar is the pivot for other financial markets. Forex Traders analysis of USDJPY last week highlighted the rising wedge pattern in the currency that is an effective barometer of global investor mood.

USDJPY – 4h Price Chart – Breakout of Rising Wedge Pattern

Source: Pepperstone

It looks like the bulls are winning that particular battle with price breaking to the downside. It’s a slow-motion move, but that’s often the way with that currency pair. Don’t be fooled by the gradual nature of the shift as the more significant point is that price action looks unwilling to test the 109.55 resistance, let alone break it.

If you want to know more about this topic or have been scammed by a fraudulent broker, please contact us at [email protected]


Nigel Frith

Latest news

Is It Time to Test the Crypto Waters Once Again as Bitcoin Rises?
Bitcoin, the most popular cryptocurrency across the planet, has surged dramatically during mid-July, reversing its downward trend and powering past $41,000. Read more
Be Wary of Phony Lawyers Pushing Fraudulent Forex Recovery Scams
Have you ever lost money because of a crooked forex broker? Have you regretted those losses until a nice lawyer called you on the phone and promised the recovery of your losses for no upfront fees? Hope does spring eternal in these situations, but, unfortunately, the lawyer is a phony. Read more

Safest Forest Brokers 2020

Broker Info Best In Customer Satisfaction Score
#1 ForexTime LogoYour capital is at risk Founded: 2011 Global CFD & FX Broker
Number One Broker
BEST FOREX BROKER Visit broker
5
#2 ForexTB logoYour capital is at risk Founded: 2015 Global Forex & CFD Broker
Number One Broker
LOWEST FEES Visit broker
4.9
#3 Tickmill forex broker logoYour capital is at risk Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#4 BlackBull MarketsYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#5 Forex Broker Pepperstone LogoCFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9

    Forex Fraud Certified Brokers

    IQ Option Logo
    FXTM Logo
    Forex.com Logo
    Plus500 Small Logo
    BlackBull Markets Logo
    Pepperstone
    HYCM Logo
    City Index Logo
    skilling logo
    XM Logo
    Exness Small Logo
    LegacyFX Small Logo
    OctaFX Logo
    Vantage FX logo
    AvaTrade logo
    IC Markets Logo