FTSE 100 nearing breakout

A three-day losing streak for the FTSE 100 took the wind out of a mid-month recovery and had investors questioning whether this was the big sell-off. Of course, it wasn't, and daily losses have been modest, with buyers using dips to top up given the dearth of alternatives to equities.

Modest upside at under-fire Deutsche Bank Wednesday has stopped the rot at UK lenders like Lloyds and Royal Bank of Scotland. Miners are bid-up, too, with a weak dollar generating interest in Anglo American, Rio Tinto and BHP Billiton.

But we are reaching an interesting time, particularly from a chart perspective.

While concerns about excessive valuations abound, UK-listed firms which pay big dividends out of overseas earnings remain hot stuff.

Depending on which way the wind's blowing, domestic stocks like housebuilders attract attention, too.

Chart analysisUsing charts on their own is for specialists, but a basic understanding of support and resistance levels, and of Fibonacci, is a valuable weapon in an investor's armoury. It's especially helpful when deciding where to place stop-loss orders.When we do experience a wobble - banana skins like Brexit "hard landing", oil prices, global economic slowdown and recession risk remain - traders are reluctant to sell too hard, knowing that others remain enthusiastic buyers at slightly lower levels.

A simple chart revealing lines of support and resistance suggests that the uptrend from the post-referendum low remains intact.

In fact, there are now three touch points - the most recent at around yesterday's low of 6,768.

The upper line on the chart below stretches from the 27 April 2015 high to touch points both in August and earlier this month. This forms a triangle marked in yellow.

The FTSE 100 could trade within this range near-term, but a breakout by mid-October is inevitable, most likely before then.

Watch this space.

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.