Market Overview: FTSE 100 Futures
The FTSE futures market was a bear bar last week. It was a FTSE 100 breakout pullback bar just below the All-Time High. Most traders were expecting to reach the measured move target above and possibly the All-Time High. Bears were expecting to sell the highs of the range and now have a bear bar. But after such a strong move it is more likely we are going a little higher after a pullback.
If you’re confused, don’t worry, we have been in a trading range for over a year, and most breakout attempts fail. Traders should be looking for good signal bars, reasonable follow-through and use correct stops to manage risk.
FTSE 100 Futures
The Weekly FTSE chart
- The FTSE 100 futures was a small bear bar with tails above and below, a breakout and pullback (a breakout pullback).
- Bulls see a breakout, follow-through, and a pullback test to the Nov 28th or Feb 7th high. We did not fully test either yet, so some bulls might wait for confirmation before going long again.
- Buying in bull channels transitions from buying above to buying below, and we might have transitioned already.
- The bulls have seen a tight bull channel since October, which is the second leg. They want the third leg to make a much higher high above this range and get closer to the All-Time High.
- The bears see a pullback and want the breakout to fail. They want a bear bar next week to short a higher high: A reversal and follow-through. They know they probably won’t get a strong sell signal.
- So some bears will wait for the resumption and trade that to fail.
- It’s a bear bar, so it is a possible sell signal, but low probability after two consecutive bear bars. Some bears will sell and sell again higher, but most traders should wait for a second bear bar or a break of a bull trend line.
- Although it is reasonable to sell above highs in a bull channel, most traders should only buy when always in long.
- Trading ranges tend to overshoot breakout points, so even if we trade below the Nov 28th high, it can still be a test to go higher.
- The bulls want to reach a measured move target just above. There are two of them. If we start to pull back strongly, some bulls will give up, not willing to keep the same risk for a marginal reward.
- It is a trading range to the left, and trading ranges are disappointing. The bulls want to leave this range and see we have had at least 4 attempts so far.
- But it always looks bullish at the top of a trading range and bearish down the bottom.
- Bulls might exit below the bear bar last week and can look to guy again on trend resumption.
The Daily FTSE chart
- The FTSE 100 futures was a small bull bar closing just above the moving average (MA.)
- The bulls saw a tight bull channel and expected a pullback. So they see last week’s three bear bars as a pullback to the moving average.
- The acceleration over the past few weeks has been increasing, and a test of the breakout points for a move higher is reasonable.
- The bears see a late acceleration in a bull trend as a sign of a climax and a possible reversal. The bears got a scalp back to the moving average. Some bears took the low probability reversal and just exited at 2:1.
- Most traders will wait for 2 legs, sideways to down, corrective legs, before trying to structure a trade.
- The bulls want to remain above the prior breakout points, even a bar below the moving average, before buying. They have been buying above average for many bars, so this is a chance to buy at a lower price.
- Some bears see Thursday as a surprise bar; it was surprisingly big in a tight bull channel. That means some bulls are trapped above, and we might race up to let them out before going sideways.
- Traps trap both sides. Here, trapping bulls into a bad long, trapping bears out of a short.
- The bears want some kind of micro DT, double top to sell, but it is more likely a scalp.
- Because we have a magnet above the All-Time High, some traders expect to reach there briefly. But because it is a trading range, and trading ranges are disappointing, the bears want an endless pullback to force the bulls to buy too high.
- The best the bears can get is likely a trading range and not a bear trend. So bears will scalp and bulls will buy and buy lower, betting we will get back up here so they can make a profit on their second entry and breakeven on their first.
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