Well the FTSE 100 seems to have stabilised a little after the recent massive falls the question is what’s going to happened next? While I cannot predict what will happen next I can take a look at the FTSE 100 chart and use technical analysis to try suggest what is happening at the moment. If you take a look at the chart below (Click on the Image to see a larger version) I will explain what I think is happening. FYI this is not a trade recommendation or advice of any kind it is my opinion and mine alone, what you choose to do after reading this is your choice. Don’t come crying to me if things don’t work out how you expect them too.
Click image to see larger version. Image © SpreadCo
Ok So looking at the chart I’ve circled and numbered 5 key points in yellow.
Point 1. The FTSE 100 failed to get past the previous high made back in May 2011.
Point 3. The FTSE 100 fails equal or better the high set at point 1.
Point 3 to 4. A new low is formed at point 4. On the way from point three the price passes the lows set at point 2 and the previous lows made in June and March 2011.
Point 5. Well it’s too early to say if this is a lower high than point 3 or point 1 as the price could continue to rise.
If you believe the idea that price retraces one third to two thirds the previous move, usually making it to half the previous move then point 5 is quite interesting. I make it a high of around 5400. So if we say the previous down move has a high of 5966 (point 3) and a low of 4791 (point 4) FYI I got these values from proRealTime as these represent the true market price not the price quoted by the spread betting company and proRealTime only shows values achieved during actual trading hours. Using these high an low values this represents a down move of 1175 points. Therefore 33% is 391.6 or 5182.7 FTSE value, 50% is 587.5 or 5378.5 FTSE value and 66% is 783.3 or 5574.3 FTSE Value.
I think these figures are especially interesting as proRealTime shows a high on the 15th Aug at 5377.23, the image I have here shows more like 5400. Still the fact remains that we are currently around 50% retrace of the previous move.
A down trend is defined as a series of lower lows and lower highs. This box can be checked, and with the 50% retrace in place a new down move could be about to start. Also if you take a look at the 20,50,200 moving average combination it shows they are all in decline another indicator that a down trend is in force. So with all that said it should be easy to suggest that the FTSE 100 can only do one thing and that’s fall. Wrong, while the evidence is strong for a continued fall it’s by no means guaranteed. So tread carefully whatever you do. For the time being I shall be leaving my pension pot in cash until I see some evidence of an upward move.
So I’m definitely erring on the side of short positions for the time being. If the FTSE 100 should fall past the most recent low then I will definitely be classifying this as a down trend an only looking for shorts. Obviously it could even fall below that level and then rise all the way back up, no one can say for sure.
Onto my spread betting action. Well it’s pretty much no existent at the moment, hence the rambling about the FTSE 100. No new trading opportunities are coming along so I’m waiting and adjusting stops on the two positions I have open. I’m happy to wait, the right opportunity is just around the corner. When the market wants me to trade it will let me know. Which is how it should be in my view. Don’t go looking for trades, let the trades come to you.
Until next time,
“May the markets be with you!”
The Spread Betting Beginner