FTSE Patterns + Candlesticks
Only joined this billboard a couple of days ago, but already have found it more informative than any. Especially wrt to chart patterns.
Barjon, keep the candlestick interpretations going. Its always good to find other/confirming interpretations.
I was slightly bullish for next week, and with the news of the capture of Saddam Hussein, i think the bulls will come out the closet for a last stance.
I do think the next major move is down and my main reasoning for this is the bearish formation of a rising wedge..... i don't know how to add my own charts (guidance welcome) so i have detailed below.
Using simple end of day close line shows a rising wedge if -
U draw a trend line through the following peaks together (15/10, 14/11, 1/12)
and
U draw a trend line through the following troughs (24/10, 20/11, 8/12)
A rising wedge, as u will know, is formed by higher highs and higher lows.....confirmed by the above. Normally a continuation of a down trend, or reversal of an up-trend. Volume normally expands at the start of the triangle or wedge, contracts as the pattern develops and then expands on the breakout. Rising wedges exhibit higher volume on the down-swings.
Check the volume charts for the period and u'll notice the above to be true, i.e. higher volumes on the downswing with volumes significantly lower than the 20 day average since the 24/11, i.e. the pattern is coming close to end.
There has also been major divergence against major market indicators (advance/decline ratio, new highs/new lows ratio and breadth thrust), which further suggests a break downwards.
U will also notice from the candlestick chart that the 3rd and 4th of December opened/closed at the same price (4,379 - 4,392). This tweezer tops/bottoms (matching tops/ bottoms) is a minor reversal signal, which is important when the candlesticks form another pattern.
This, i think, is referring to a reversal of the new pattern of waves that has formed since the 1st of December, i.e. we have broken the 5 up 3 down Elliot Wave formation, and have moved into a zig-zag 5 down and 3 up formation (with Friday being the beginning of zig zag wave B, with target of 4,380).
The tweezer top/bottom pattern has also acted as a divergence point away from the US DOW/S&P, with correlation moving from 0.6 to 0.4, i.e. strong positive to weak positive. Perhaps explaining why we're not sitting above 4,400.
Rising wedge target :
Peak - trough = 4,410 - 4,239 = 171
Target Move = 171 from breakout point.
I have taken the breakout point to be 4,360.
Target price = breakout point - target move = 4,360 - 171 = 4,189.
Interesting to note that 4,183-4,189 is a Fib retracement from 1st Jul trough.
Suppose we'll have to wait for the breakout to see wot happens.
All thoughts welcome
