Breakout Alert: FTSE 100
The FTSE 100 has broken out of a wedge pattern that had been forming for over 10 weeks. Let’s explore the trading opportunities this breakout has created.
Breakout Follows Fakeout
Since mid-May, the FTSE 100 had been consolidating within a tightening trading range or wedge. After weeks of small daily ranges and choppy sideways price action due to low summer volumes, last week brought a significant change.
On Thursday, the FTSE threatened to break lower following weak earnings reports from the US tech sector, which dampened market sentiment. However, buyers quickly stepped in, driving the market back into the wedge and forming a bullish 'fakeout' candle backed by a significant increase in volume.
Friday's price action saw the market drive higher, decisively breaking and closing above the wedge pattern. This breakout sets the stage for a continuation of the FTSE’s long-term uptrend, with momentum traders targeting a retest of the May highs.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
Lower Timeframe Analysis
One strategy that momentum-based index traders might use to capitalise on the FTSE’s breakout is to buy pullbacks on a lower timeframe, such as the hourly candle chart.
To time their pullback trades, traders can utilise trendlines, moving averages, horizontal support levels, and Fibonacci retracements.
On this timeframe, we can already see that the FTSE has broken below the initial trendline that formed following the breakout. This suggests that the market could undergo a deeper pullback before the trend resumes.
FTSE 100 Hourly Candle Chart
Past performance is not a reliable indicator of future results
UK Sector Snapshot
A seven-day sector snapshot reveals that the FTSE’s current rally is being driven by the consumer sectors, with Consumer Staples and Consumer Discretionary leading the way. Strong earnings reports from companies like Compass Group (CPG) and British American Tobacco (BATS) have propelled these sectors higher. Meanwhile, the Real Estate, Energy, and Tech sectors have been lagging.
Momentum traders looking to play the FTSE’s breakout through individual stocks might find opportunities within the Consumer Staples and Consumer Discretionary sectors.
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Breakout Follows Fakeout
Since mid-May, the FTSE 100 had been consolidating within a tightening trading range or wedge. After weeks of small daily ranges and choppy sideways price action due to low summer volumes, last week brought a significant change.
On Thursday, the FTSE threatened to break lower following weak earnings reports from the US tech sector, which dampened market sentiment. However, buyers quickly stepped in, driving the market back into the wedge and forming a bullish 'fakeout' candle backed by a significant increase in volume.
Friday's price action saw the market drive higher, decisively breaking and closing above the wedge pattern. This breakout sets the stage for a continuation of the FTSE’s long-term uptrend, with momentum traders targeting a retest of the May highs.
FTSE 100 Daily Candle Chart
Past performance is not a reliable indicator of future results
Lower Timeframe Analysis
One strategy that momentum-based index traders might use to capitalise on the FTSE’s breakout is to buy pullbacks on a lower timeframe, such as the hourly candle chart.
To time their pullback trades, traders can utilise trendlines, moving averages, horizontal support levels, and Fibonacci retracements.
On this timeframe, we can already see that the FTSE has broken below the initial trendline that formed following the breakout. This suggests that the market could undergo a deeper pullback before the trend resumes.
FTSE 100 Hourly Candle Chart
Past performance is not a reliable indicator of future results
UK Sector Snapshot
A seven-day sector snapshot reveals that the FTSE’s current rally is being driven by the consumer sectors, with Consumer Staples and Consumer Discretionary leading the way. Strong earnings reports from companies like Compass Group (CPG) and British American Tobacco (BATS) have propelled these sectors higher. Meanwhile, the Real Estate, Energy, and Tech sectors have been lagging.
Momentum traders looking to play the FTSE’s breakout through individual stocks might find opportunities within the Consumer Staples and Consumer Discretionary sectors.
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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