The FTSE saw a second splash of green on Friday which gave us a Hammer to follow up Thursdays Bullish Harami. We have been flagging 5832 as the level we need to re take for us to believe that the pain may be over and this now looks a real possibility. There is an awful amount of work to do before we turn overall Bullish but there is a strong likelihood of a decent bounce here with a first target up at 5935.5. Our recent low at 5711.5 now carries great importance and will be the one to watch if the bounce scenario falters.
Indicators in Play
A Harami consists of two candles at the top or bottom of trends. In a Bear market there would be a large red candle followed by a small body contained within the previous candle. The opposite applies in a Bull market. Harami is the Japanese word for pregnant with the larger candle being the mother and the smaller one the baby.
A Hammer occurs at the bottom of trends and is a reversal pattern. Its shape is formed when a market opens, takes a spike down and then recovers to close near the top of the days range. This gives us a small body with a long lower shadow.
Summary
We have put the sell tickets away now with the Bulls making the right noises. We have some intra day support at 5775 which would tell us that the bounce is faltering if breached. However, with a Bullish Harami followed by Fridays Hammer we are looking for a continuation of the bounce.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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