technical analysis overview courtesy of cantor index

2 mins. to read
FTSE 100, Daily, Candle

The technical situation on the FTSE has not changed greatly in the past couple of weeks, as the index remains within the near term trading range, red region, which we have been monitoring for a few weeks now.

On the daily graph we have kept the near term trading range, red region. In our last note we suggested that the index at the lower end of this range looked to be tempting for the bargain hunters, so the slight rally off these levels has come as no real surprise.

The odds do seem to favour a move to the upper end of the channel, buoyed by the strong reversal posted at the end of the week, highlighted by the near Candlestick Morning Star pattern. However we suspect that these recent buyers will start to feel nervous if the FTSE posts a move to the near term highs around 5,850. As a result we do not see particularly good risk/reward for fresh buying interest here.

In summary then the FTSE has continued to post a solid H2 recovery and the index is in a strong near term bullish trend, red region. Leaving an optimistic view for the remainder of Q3. Breaks under the trading range would be required to turn more negative.

FTSE 100, Weekly, Candle

The situation on the Weekly chart will take some time to change greatly, so the text below may remain broadly same week to week unless major levels are broken. As with the monthly chart below however we will update the graph each week, and post all the text so that new readers will have all the information to hand.

For the Weekly chart we can see how the FTSE 100 has clearly had a hard time breaking up through the 6,000 area over the past couple of years. We can also see how the current price action could well be the price moving down the right shoulder of a ‘head and shoulder’ pattern. It is much too early to call this pattern formally here, as the neckline would need to be breached, around 4,775, but it is still worth noting as this could result in medium term nervousness. Also in recent weeks the S&P 500 and the Dow  have both posted higher medium term highs, suggesting the FTSE is set to do the same, which would of course negate any possible bearish H&S.

Also on this chart we have drawn some potential Elliot Wave counts. With the 2009 to 2011 move being a five wave impulse wave, and the resultant correction the traditional abc pattern. This labelling follows the standard Elliot convention that Wave 4 must not overlap with Wave 1. Also as is typical the abc correction has found support from the end of Wave 4.

One method in using Elliot Waves is to create a trading channel off waves 2,4 and projecting the parallel higher. Wave c of the reaction broke through this support and also interestingly found support off the 50% retracement level, central green line.

While the price action is under the 2011 highs trend followers will be concerned over whether the current trading range, red region, is the start of a fresh 5 wave impulse wave higher, or part of a more complex WXY correction.

So in the interim we can see the current trading range, red region, dominating the trading mood, with a positive bias.

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