03 Jan A Technical Look at Today’s FTSE And DOW Price Action
If you were long over the New Year Weekend then you will have almost certainly enjoyed today’s Market action with huge gap-up open’s taking price outside of the previous trading range.
If U.S Indices close red today then we statistically have a possible topping signal as SPX displays a number of gap-up opens with red closes at or near previous swing highs.
However, the point of this post is really aimed at drawing attention to some trend line supports and resistance’s on the DOW and FTSE daily charts.
Starting with FTSE, price gapped straight through the triangle that had contained price for over 6 Months. Europe sold off early morning as profit taking ensued, however, FTSE found support on it’s triangle, making for a nice intraday long entry, even though at the time the trade appeared unlikely to play out, but positive MACD divergence on 1 minute and 5 minute time frames made the entry worth holding on to and FTSE soon rallied to close the session near it’s morning high’s:
The pattern on DOW was somewhat different, showing a number of resisting trend lines. I was suprised DOW could not find the strength to tag the underside of the resisting trend line shown in the chart below… It would be very unlikely for a top to occur without any test of this, so it’s something worth bearing in mind. Worth pointing out that in the 2008 market top there was an identical pattern and back then DOW fell short of the 2nd trend line back test before the major bear market followed. I’m not at all suggesting that history will repeat in this precise way, it’s just another weapon in our trading arsenal.
I very much like the idealistic idea of the converging trend lines and resistances denoted by the red “star” becoming a very attractive upside target and an even more attractive low risk short entry. This “star” sits in the 12,550 region and almost every time frame has one reason or another as to why price may struggle to break this area, but only if time and price combine at that specific point.
The chart makes things clearer:
Ultimately I think all of the areas annotated in the above chart’s will, if reached, provide key level’s that we can enter positions from with well defined stop loss levels and easily calculated target levels whether the trade be long or short.