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FTSE 100 Microchannel, Open Breakout Gap, Outside Bar

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Market Overview: FTSE 100 Futures

FTSE 100 futures went higher last month above the prior inside bar, breaking a bull microchannel. Traders expect more, but that can mean a pullback first to 50% or closing the breakout gap below. It is too high to buy up here, but traders might buy the new high with a small size and scale-in. Otherwise, the inside bar is a sign of profit-taking.

FTSE 100 Futures

The Monthly FTSE chart

FTSE 100 Microchannel, Open Breakout Gap, Outside Bar
FTSE 100 Microchannel, Open Breakout Gap, Outside Bar
  • The FTSE 100 futures monthly chart went higher with a bull outside up bar closing near its high.
  • The bulls see a microchannel and buy below the low of a prior bar.
  • The bulls see open breakout points and so a breakout gap below.
  • As long as gaps are open, it is more likely a trending environment.
  • When gaps close, traders will target those gaps in a trading range, BLSHS environment.
  • The bears see a broad bull channel, with family two-sided trading ranges in between. Some bears will sell new highs and scale in above prior highs, betting they will make money.
  • Currently, they are not able to close the last gap, and that’s a problem for them.
  • I suspect they will try once more to do that next month.
  • Always in long, so traders should be long or flat going into August.
  • Because of the distance to the moving average, we are more likely to pull back a little first to give the bulls a better risk-reward ratio on their trade.
  • Can you short here? No. It’s better to wait for a higher probability sell signal below a good bear bar. Selling below anything in a tight bull channel is low probability.
  • Selling above a rising moving average is also a weak trade. The price is more likely to go sideways there, and then a better buy/sell will set up.
  • Expect sideways to up next week.
  • The inside bar was a reasonable buy below, betting that will not be the top and the bulls will need at least a double top to exit long.

The Weekly FTSE chart

FTSE 100 Tight Trading Range, Sell Signal After Buy Signal
FTSE 100 Tight Trading Range, Sell Signal After Buy Signal
  • The FTSE 100 futures weekly chart went lower, with a bear bar closing on its low.
  • The bar triggered the buy orders from the High 2 and reversed strongly.
  • It is a tight trading range and often breakout attempts come right back into the range of the prior bar.
  • Bears were stuck selling below bars and needed to scale in to get out, but they are not yet out of the stop entry short.
  • If a bear sold below a prior bar’s low, they are still stuck.
  • I think those traders will exit when the price comes back.
  • Bulls are disappointed with the buy, so they will probably exit if the price returns to their entry at the close or high of the prior weekly bar.
  • Bulls closed the open gap above, which was expected. That means a trading range is more likely.
  • Trading ranges create channels and then resist breaking out of them.
  • We are always in long, but I’ll change my mind if the bears close below that High 2.
  • The best sells recently were above a bear bar, so the best buys are typically below a bull bar until one side gets disappointed.
  • Both moving averages are rising so a bull channel, and traders expect the moving average to act as support.
  • The pain trade for the bulls is if it becomes a trading range, all the juicy gap targets are below.
  • Expect sideways to up next week.

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