FTSE 100 in a complex bullish pattern

I say “bullish pattern” but this pattern is not obvious. This is one wave count and because the pattern is complex it could be interpreted differently, we could have an alternate wave count. I think this wave count is the most likely scenario.

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I believe the decline to the November low (6904) is wave 3 of a five-wave decline [i,ii,iii,iv,v (circle)]. We have an ending diagonal [(i),(ii),(iii),(iv),(v)] inside wave v (circle), this is textbook, ending diagonals occur in the fifth wave.  Here it’s the fifth wave inside the third. Therefore the rally from 6904 is wave 4, this rally is corrective so likely to be in three waves [a,b,c (circle)]. Waves a (circle) and b (circle) are complete, we are now in wave c (circle) and this is where the pattern is complex because wave c (circle) is an impulse wave but right now it does not look like an impulse wave.

One could argue that wave c (circle) ended yesterday at 7078.5, this would assume that wave c (circle) is a small ending diagonal ending at yesterday’s high. I don’t think so, at that level wave 4  is too small in time and magnitude. If wave 4 ended yesterday, it would have lasted 9 days while wave 2 lasted 13 days. In general the fourth wave lasts longer than the second wave, wave 4 should last two weeks or more. And in terms of upward retracement, wave 4 has retraced 24% of wave 3 which is not enough. A fourth wave tends to retrace 38.2% of the third wave, this level is 7184, or more. Therefore I suspect wave 4 up is not yet done.

I believe the current pullback is wave (ii) inside wave c (circle) inside wave 4. We have a complex pattern inside wave (ii) which is an expanded flat [a,b,c], wave a is in three waves, wave b is a snall ending diagonal and wave c is an impulse wave that will end near 6950. The next move is wave (iii) up, the target is 7150.

The above references the authors opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

Thierry is trading strategist at e-yield.com. A proprietary trader, investment adviser, analyst and writer who has been delivering products and services to retail and corporate investors since 2000. Speciality: Stock market analysis & forecast, sentiment analysis, Elliott wave analysis, EUR/USD, GBP/USD, Gold, dollar, intraday / short term / long term. I am a member of the Society of Technical Analysts and I hold the Investment Management Certificate. I started to give trading advice in 2002 with One Way Bet where I was responsible for the UK Stock Tips and FTSE Intra-day services, then with Fleet Street Publications where I was the editor of the Spread Trader tip sheet. I have worked with leading hedge funds as an advisor and have written many articles for publications including Money Week and various research websites. TA qualifications: MSTA Unit 01 UK Regulation and Markets Investment Management Certificate (IMRO)

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