Weekend FTSE Analysis for W/C 19th September 2011

Weekend FTSE Analysis for W/C 19th September 2011

As with most of the analysis I provide for any of the Indices, it will most likely apply to all of the major Indices unless specifically stated otherwise.

This particular  analysis is a tough one to post because of course, I don’t like being wrong, yet practically all analysis I’ve read this weekend has a predominantly bearish short term outlook.

The risk with any current forecast lies within the fact that nobody really knows what FOMC  holds and ultimately it’s effect on the markets over the coming week. What I can say is that most of the time, the charts already have it right in advance – my recent  GBP:CHF analysis is one example of that.

Looking at FTSE daily chart and we have what many are calling a bear flag, but you’ll know that before any major move down (or up) the market likes to wrong-foot everyone and this usually occurs by breaking through a major resistance (or support) prior to the reversal. In this case, I see the current daily price action as a tightly coiled spring, with the higher lows showing that the coil is more likely to spring  towards the upside. You could argue that we have an ascending triangle formation here.

Therefore, a convincing break of the red line depicted in this chart shows probability that price will attempt to achieve the circled area re-testing the level of the original break down:

 

Looking at the 4 hourly time frame, we have an area to watch in the form of the down trend line  if the upside break does take place:

 

It doesn’t matter whether this move takes place or not, but if we see signs that it is taking place, we now have a plan of how we will trade it.

Good trading!

7 Comments
  • bracke
    Posted at 11:14h, 19 September

    RS2000

    Taking the current FTSE pattern as an ascending triangle and this mornings (19/9) price action suggests that a visit to the bottom trendline at 5100 is a fair probability before a move towards your red circle..

  • RS2OOO
    Posted at 12:27h, 19 September

    That is quite possible, despite that, I actually bought FTSE 15 mins ago (5264 – probably just a day trade) with tight stops and an aim to get stops at breakeven as soon as possible. I also bought DOW futures with much wider stops.

    The red circle targeted area only comes into play as a low risk trade on a break above and ideally a daily close above the red line depicted in the first chart. This line is clearly resistance for now but it is time for price to decide which direction it will break from here.

    Looking at this morning’s weak price action, hindsight might have suggested that a short from that resistance (red line) would also have been a good trade as it would allow for tight well defined stop loss levels, but as I analysed the chart it appeared that statistically the odds favoured an upwards break from the current daily chart pattern.

    It’s been a little while since there were so many uber bearish headlines. Does make me think longs are a silly idea, but there is a contrarian view that is equally as valid.

  • bracke
    Posted at 13:08h, 19 September

    With so much volatility in the market it can go either way and has been doing both on the same day!

    I will continue to trade intraday on price action without prejudice.

  • RS2OOO
    Posted at 13:25h, 19 September

    I know you’re a good trader bracke, so always interested in your views.

    I’m quite looking forward to seeing what actually happens this week!

  • bracke
    Posted at 14:25h, 19 September

    RS2000

    I’ve learnt not to have views about the market, it’s dangerous. I take it as it comes.

    Trading is never easy but when there is a clear trend without intervention it is relatively easy.

    The current trading environment is the complete opposite. No clear trend and intervention left, right and centre.

    Ultra care needed along with all of the other trading do’s and dont’s.

    I think if anyone can trade successfully in the curent conditions they will do well when ‘normality’ resumes but that may be a long time coming.

  • RS2OOO
    Posted at 23:24h, 20 September

    All longs were closed today and I’ve gone flat on FTSE and DOW awaiting the next confirmed signal for either direction.

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