*My technical analysis and current trade positions on the FTSE100 Cash Index*
In this blog post I am going to show you how I have been trading the FTSE 100 index this week, what my technical analysis was before each trade and how I managed the trade positions. I will finish up by showing you where I think price will go next and also how one could trade the FTSE100 index next week.
As always my technical analysis and charting is done using the TradingView platform which offers all of the functionality I need and more. They have a library of technical indicators and even the ability to add your own custom indicators. Check out their products by clicking on the link below.
Let’s get right in to the analysis and look at the FTSE Index daily timeframe price chart.
As you can see, price is forming a very tight wedge after rebounding from the multi-year lows at circa 4800. The index has gained over 20% in value since the lows of the 2020 sell-off which is strong performance considering we still no very little about the total impact of the virus and when it will end.
As it stands, I believe this consolidation is just that, a pause before the selling continues. Price is struggling to break higher with no daily candle closures above the 5850 zone and the wedge pattern is getting tighter and tighter as each day goes on.
A breakout of this pattern in either direction should provide good momentum trade possibilities but I believe there is a greater possibility of this being a bearish breakout. I am now going to show you my previous intraday trades on the FTSE100 index this week and then I will follow up with my explanations of the current market fundamentals moving the stock markets and where I think the price of this Index will go next.
Short Position 1 @ 5800 resistance zone.
This first short trade was very simple and effective. I saw that the previous bullish trendline supporting price on this timeframe was broken the previous week and price was now retesting the trendline and resistance zone at 5800. I shorted on a strong bearish candle closure and traded price down over 100 points over the next 12 hours of trading.
As I have mentioned in multiple blog posts recently, the current market conditions are volatile and choppy. DO NOT BE GREEDY! I have adjusted my trade management at the moment to take profits and lock in a small return on capital as soon as I can. Small returns on capital helps to keep you in the business of trading and anything is better than nothing right now. I closed a portion of short this short position after the lower low was made and a bullish engulfing candle began to form.
Price actually then went to come back up to my original entry and retested the 5800 resistance zone. I was happy to take a small return on capital from this trade and I used this reversal for my next trade entry that I will show you below.
Short Position 2 @ 5800 resistance zone.
My second short trade position was shortly after the first. I was (and still am) confident that so long as the resistance zone holds strong at around 5800 then shorting rejections of this zone will provide profitable trades. Once again, price showed signs of rejections and bearish candle closures formed a lower high. I shorted just below 5800 and rode the next bearish wave over 180 points down to around the 5600 level.
Once again, do not be greedy. I would love to see price reach previous multi-year lows at 4800 and lower but it is not going to happen overnight and it might not happen at all. In todays markets, when your trade moves over 180 points in less than 48 hours you should definitely take a strong percentage of profits to lock in a good return.
I did this on the break and retest of the bearish intraday trendline that was previously holding price down. A higher low formed and bullish momentum came in to the markets so I assumed a reversal might occur and took profits. I removed my remaining exposure from the balance of the short position and left the trade to run which was fine as price did indeed climb back up to my original resistance zone.
Short Position 3 @ 5800 resistance zone.
This chart shows my 3rd and existing open short position on the FTSE100 index. Once again, price closed below the resistance zone around 5800 which is at the top of my higher timeframe consolidation pattern. As long as price remains below this resistance I am happy to keep selling the highs and taking profits as it falls. So far this method has produced nearly 400 points of intraday selling trades.
Currently price is back below the daily pivot level and there is some strong bearish candle closures forming on the lower timeframe charts (15 minutes shown above). So long as this lower high hold I anticipate that price will continue back down to previous support at 5700 and hopefully lower.
Top Tip! If there is one thing you can learn from this blog post it is that greed is not always good. Markets are choppy and volatility is high. Take profits, lock in returns and take what you can from the markets. Staying positive is key.
I tend to share live updates of my trades on my Instagram page so please follow me if you want to follow my day to day activities. My username is Charlieab94
Financial Market Fundamentals.
Fundamentally I can see no reason why the FTSE 100 index or any other countries stocks might be gaining value by any substantial amount outside of extensive Quantitive Easing. Unemployment is at record highs even if our data doesn’t show it yet. The furlough scheme in the UK is designed to keep staff employed and paid for by the government (80% of salary) however the simple fact is that if the furlough scheme didn’t exist, these employees would NOT BE EMPLOYED. The government paying salaries of staff that aren’t needed or working is just covering up the unemployment figures.
If you look at the unemployment figures in the US over the past few weeks you can see a much more honest picture of just how many people are now out of work in an economy. The chart below shows US initial weekly jobless claims (new claimant for unemployment benefits).
As you can see, without a furlough scheme to keep people “employed” by the government, over the past 5 weeks over 26 million Americans have filed unemployment claims. That represents almost 20% of the entire US workforce now out of employment.
Another reason why I am still sceptical to buy into this current “bull run” and small recovery in the stock markets is because we are trading almost entirely blind! We are yet to receive any substantial financial data that puts a monetary value on the amount of damage caused to businesses/industries/the economy because of the Coronavirus lockdown.
Future Price Predictions.
I am looking for further downside potential on the FTSE100 index over the next few days and weeks. Resistance at 5800 has formed a strong zone and I do believe that if this price level holds then we can see a sell off down to 5500.00 and lower over the next few week
The charts above show a lower timeframe and intermediate timeframe perspective on how I think price might move over the next few days and weeks. Remember, keep it simple… buy low and sell high and if in doubt, don’t trade.
The safest option, instead of selling prior to the breakout, is to wait for this current consolidation to be broken and then jump into the trade with the momentum. There is a bullish trendline supporting price that needs to be broken before any further extended downside move could be expected.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.
FTMO Trader Funding Programme.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.