FTSE 100 bull doji bar & pause at 100-week MA

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Market Overview: European Market Analysis

The FTSE futures market failed to get follow-through selling from the largest bear bar since the COVID crash. Traders are looking to see if the bears can get a second leg down or whether the pause here is an overdue pullback in a longer bull channel. This confusion may give us sideways to down trading next week while traders decide.

FTSE 100 Futures

The Weekly FTSE chart

• This week’s FTSE candlestick was a bull doji bar closing at its midpoint with large tails above and below.
• Although it traded lower than last week’s large bear surprise bar, it was weak follow-through selling after the largest pullback in a 16-month bull trend.
• Both this week and last week’s bar have tails on the bottom which suggest it is not as bearish as it could be.
• The bears see it as a pause before a second leg down. Though we might need to go sideways to up first.
• The bulls see it as the bottom of a 12-month trading range, the top of a breakout from 2021 and previous tight trading range which was a magnet and reasonable place for bears to exit.
• The bulls might also see it as the deepest pullback in a much longer bull trend from the COVID crash.
• Either way the bears have struggled to get follow-through selling on the weekly chart for more than 3 consecutive weeks since the COVID crash – and this week was no different.
• The bears know we failed to breakout from the pre-COVID resistance above which improves their probability to scale into shorts above this week’s bar.  They need a strong close next week to convince trailers we are going lower.
• This week was also the first moving average gap bar in over 3 months which is a reasonable buy setup in a trend. The bulls have bought each time this has happened in the prior 12 months.
• If the bulls take that signal above 7250 it might suggest the bottom of the trading range is holding with a view to test the high at 7700.
• The bears will need to print another week below the moving averages to convince traders we will get a second push down. Hoping on a measured move target to 6400
• Because last week was a doji there is a lack of commitment which is the hallmark of a trading range. Traders will likely BLSHS (Buy low sell high scalp.)
• Bulls want to trade higher next week and trigger a High 1 buy signal but will need strong follow through buying to get there. A high 1 buy in the middle of a trading range is not a strong signal so they will likely use a wide stop and scale in lower at a possible double bottom.
• If we do go much higher in the next week or two, we can expect sellers around the moving average looking for a possible low 1 sell, possible second leg down to 6800.

The Daily FTSE chart

• Friday’s candlestick on the daily FTSE chart was a bear doji with long tails. It was a possible failed low 1 at the moving average.
• Wednesday and Friday was a possible micro double top and Thursday and Friday printed an inside-outside breakout mode pattern for next week.
• Although Monday continued last week’s selling pressure, it finished at a measured move break of an expanding triangle from last week and then reversed higher.
• The bears see it as a pullback in a weak bear channel and a high probability sell if we reject the moving average again or if we trade lower for another leg and test of 6800. 6800 is a reasonable exit as it has been support in a 6-month trading range.
• That would also be a possible double bottom at the bottom of the trading range and reasonable buy setup for a test of the highs.
• Bears want to convince traders that was the spike for a longer bear trend but were unable to get strong closes this week.
• The bulls see Friday’s failed low 1 and want a second leg up past the moving average. They see the spike down as a sell climax.
• Because we are sitting in a 12-month trading range, both bulls and bears are likely to be disappointed.
• We will likely see sellers above at the moving average and buyers below betting on a trading range. So the result is probably sideways to down.
• Bears would need a strong close, which they might get closer up to around 7300 to convince traders we will go down further.
• March and April are often the most bullish months of the year. So if we do see a second leg down it might end at 6800 creating a double bottom buy signal. That will help convince traders we have seen the low for many months, possibly even the rest of the year.

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