The UK 100 index of London listed Blue-chip shares looks set to close higher this week, up by 0.7% at 7670 to be precise. This may might not sound much, but in the context of remaining within 50pts of July highs, following a strong rebound, it suggests that risk appetite remains strong. Which means the opportunity to make money.

There’s a chance that the index pushes on towards 7791 June highs, which would imply upside of 120pts, or 1.5%. This, again, may not sound much, but in order for it to be delivered, it likely requires many of the big name shares on the index, especially the heavyweights, to rally themselves (think HSBC, BP, Shell, Astra, Glaxo, BATS, Diageo, Rio, Unilever, Vodafone, Reckitt).

On the flip side, having already fallen 50pts from today’s 7715 fresh July highs (blame a rebound by Sterling; GBP not Raheem), there is the possibility that the index pulls all the way back to 7600, a decline of 70pts, or 0.9%. Why 7600? Because this is where it would likely encounter the same 3-week rising support that prevented it from falling further on Wednesday, engineering a 145pt/1.9% rebound to the highs of this morning.

So I’ve given you two possibilities for trading the UK Index index next week. But I’ve also provided you with an idea of how far the index might move, giving you an idea of how far some of the big name stocks might also be set to move. Because not all clients trade the index, but most have shares. And, whatever you trade, it’s important to know what the index and general sentiment are doing.

Even if you don’t trade any of the downside that may materialise (known as trading short), we have still identified where the index might bottom out, which could offer you another bite at the cherry in terms of capitalising on any subsequent recovery rally. Something for everyone, the Bulls and the Bears. Will trade fears rise or fall? Will Sterling rally or tank? Will Banks/Miners go higher or lower? Either or all could move the index next week.

This is what trading is all about – identifying possible support and resistance, where you might be able to trade in and out. Doing your homework makes it easier to act once the price gets to a pre-defined level. It removes some of the emotion that can influence on-the-spot decisions, making all the difference between a good and bad decision under pressure, and a profit rather than a loss.

At Accendo Markets we work hard with our clients, helping them understand how the index and share prices move, how support and resistance forms and where prices may flag or accelerate. Yes you can trade by just scrolling through the charts, and then going for it, but it’s much easier when you have identified levels above or below which you’d like to trade; once a breakout or breakdown has been confirmed, one a bounce or pullback has started to show itself, rather than just hoping it will happen.

The reward may well be less, but so too should the risk of the trade going against you. A more calculated decision if you will. Do your homework, know your levels. As any good carpenter would say, “measure twice, cut once”. To stay abreast of the what UK Index does next week get access to our award-winning research.

Mike van Dulken, Head of Research, 13 July 2018