FTSE 100 Bull Breakout to Sell Climax High

Market Overview: FTSE 100 Futures

The FTSE futures market was a big bull breakout and follow-through. We are testing with breakout to sell climax high where trend trading bulls were expecting a move up. They got trapped and now we might let them out. Though the bars are so strong some might hold for a test of the high. The bears expect a second leg down after such a strong surprise but might have to wait to get it.

FTSE 100 Futures

The Weekly FTSE chart

• The FTSE 100 futures traded higher last week with a bull bar closing on its high so we might gap up on Monday.
• It is the second consecutive bull bar, so a bull breakout and follow through.
• The bar closed above the moving average, which was likely considering only 2 of the past 20 bars have closed below.
• Bulls were willing to buy above the MA for so long, and it was a high probability to buy around March 20^th for a move back up.
• We said last week that there could be sellers above the high of the bull doji, and there were. What we didn’t expect were so many more buyers!
• There is a strong open gap from this week’s low to the high two weeks ago. We are likely always in long and still on the swing buy from October.
• Bulls bought the MA and scaled in lower on the close of the doji – you can see a total lack of selling from the open of 2 weeks ago.
• The bulls that got stuck on Feb 27^th bought the close of the doji and were at breakeven before last week opened. But they didn’t exit positions back at the moving average.
• Some bears sold the high of that doji and are now trapped. The market may let them out with a small second leg from the March move down.
• Bears will expect at least a bear bar, perhaps around the low of March 6^{th –} a surprise sell-off where bulls got stuck.
• Some bears see this as a failed breakout above a trading range – a type of expanding triangle that will sell higher, taking a 2nd entry short or scale in above big bear bars.
• Bulls see it as a bull breakout, a strong trend and a 50% pullback from Oct 10^th.
• Bulls want the second leg sideways to up, and they will likely get it with a strong gap and consecutive bull bars closing above the MA.
• Bears will also expect a second leg – the bear micro channel was so tight it was reasonable to sell above the doji on March 20th and scale in higher.
• Traders should expect sideways to up next week.

The Daily FTSE chart

• The FTSE 100 futures traded higher with a strong bull bar closing on its high on Friday, so we might gap up on Monday.
• It is consecutive bull bars closing on their highs and above the moving average. One is large, so it is likely always in long, and we broke above the prior swing high.
• It is a bull breakout, but the bulls will want to see follow-through on Monday to confirm a measured-move up.
• So why the pause last week? Look left – it was a bear surprise, a sell climax when the bull trend line was broken and had follow-through selling instead of buying.
• March 9^th, 10^th and 13^th were not supposed to be so strong – so it was a surprise, a low probability event and therefore traders expected a second leg sideways to down which they got.
• Bulls got trapped buying the Jan 25^th swing-low scaled in lower and made money. We are right back at the give-up bear bar.
• Some bulls are still stuck on March 9^th and we might let them out before the bears get their second leg down.
• Notice the 20-bar MA crossed the 100-bar for the first time in 4 months, which might limit buyers up here.
• Some traders will see the strong trend from October and trade it like a trend – but we have been sideways for nearly 3 months – all gaps have been closed, or we would expect to close.
• That means the strong bear gap above is a likely magnet and we might need to get there over the next 2 weeks.
• The bears triggered a low 1 sell on Thursday, but with such a tight bull micro channel, it was a higher probability buy zone below the low of Wednesday.
• If you’re confused – don’t worry – its a trading range. We had a bull breakout to an all-time high then collapsed. Then we broke a swing low and reversed back.
• Expect sideways to up next week but with both moving averages flat we might get limited movement.

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