Market Overview: European Market Analysis
The FTSE futures market continued bull resumption to finish higher again after the largest bear pullback in 18 months. It failed to reach the breakout point and is now at the top of the developing trading range. On the daily it is a tight bull channel so we might work higher into next week to find sellers looking for a possible second leg down.
FTSE 100 Futures
The Weekly FTSE chart
- This week’s FTSE candlestick was a small bull bar closing on its high so Monday next week might gap up.
- That makes 3 bull bars in a row. The FTSE has not had 4 bull bars in a row since Oct 2020. It is reasonable to assume that next week there will be another smaller bar and possibly a bear bar.
- We said last week the best case for the bulls is we get a pause bar this week around the start of the bear breakout. This was partly true, but it was more bullish, but it didn’t make it up to the start of the bear breakout. The bar closed just below the top of this range.
- The bulls see a successful pullback trend resumption after the first pullback in a 16-month broad bull channel.
- The bears see the first leg of a deep pullback erasing 12 months of that bull trend. They see we are at the top of a trend that has at least transitioned into a trading range.
- The bears will also see it as a pause before a possible second leg down to the February low.
- The two largest bars in the trend have formed in the past 4 weeks – big up, big down, big confusion. Traders will likely BLSHS (buy low sell high and scalp.)
- If you’re a bull, 3 bull bars in a row are usually a reasonable buy, but the context is bad, the top of a trading range. If you buy you need a wide stop and scale in.
- And if you’re buying, where is your target? A test of the 7700 high, but the reward is low relative to risk, therefore if you’re a bull you’re scalping.
- If you’re a bull scalper, who is taking the other side of your trade? Reasonable place for bears to swing.
- We said last week the bears want next week to stall at the top of this trading range and they got it. Between 7500 and 7700 we have had 10 weeks of tails on top of bars in this area.
- The bulls will need another strong close with a tail below to convince traders we are going higher.
The Daily FTSE chart
- Friday’s candlestick on the daily FTSE chart was a bull bar above its midpoint. Because Friday has also formed a micro double top with Wednesday this might reduce the chance of a gap up.
- We said last week that bears wouldn’t like to sell 3 big bull bars and they did not.
- We also said bears might wait to scale in at the 7500 big round number, measured move target above. We have paused here while traders decide whether there is more upside to go.
- Bulls see at least 2 pushes up in a tight bull channel from the March 7th low. Tuesday, Wednesday and Thursday could be the final flag before the 3rd push up.
- Bulls see the February low as a sell climax in a broad bull channel, or the bottom of a trading range so both were reasonable buys.
- We said last week we haven’t had a bar go below the low of a prior yet since last week, that remains true so it is not as bearish as it might seem.
- Bulls might see an expanding triangle with the Feb 10th and 28th highs. They might see the start of a breakout of that to go higher.
- Are we always in long or short? Because both sides could argue their case, it is likely we are in a trading range.
- The bears have struggled to get more than two bear bars in a row for 3 weeks so it is not as bearish as it could be.
- The bears are looking to get a reasonable low 1, but it not a high probability sell signal in a tight bull channel. A higher probability sell would be a second entry Low 2 near the top of this trading range.
- Bulls know this and will likely buy below bars until then.
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