The FTSE is rapidly approaching a very significant level right now – the pen-ultimate level to its all-time-high of 6950 (which was last tested in January 2000), before the tech bubble crashed and burned.
Having remained unbroken for the past 14 years, this level of resistance (supply zone) at 6868 has held for 14 years and has behaved like a true brick wall, obstructing in the way of price meeting the all-time-high.
Over the last 15 months, price has rejected this pen-ultimate all-time-high no less than 7 times. On each occasion, it bounced and price fell away. On 4 out of the 7 occasions when it rejected this level, price fell away dramatically in contrast to the 3 occasions where price was hesitant to fall in value (on the 3 instances between May – July 2014).
So what’s in store this time round?
Well, as this level has held for 14 years and has been rejected by price 7 out of 7 occasions, the odds are stacked in favour of a potential sell. This is what the odds suggest.
It’s not quite ready to trade yet. Hold your horses! Now is the time where the frequently overlooked and undervalued skill-sets of patience and discipline come into the game.
Firstly, we want price to come to the level. We have the 6868 level in our sights, now we want price to test it again, just like it has before.
The more conservative traders will simply wait for a price action-based sell signal to occur, off the level, in the form of a bearish pin bar reversal, doji, double inside bar or reversal pattern on the smaller timeframes and will look to trade this according to strategy rules.
The more aggressive option for some traders will be to simply trade this with a sell order just in advance of the level, with a stoploss 50-100 points above it. Even though this approach may seem to many like getting in the way of an oncoming train, if successful, the entry will coincide with the very start of the move down and the trader will be able to benefit from a “free trade” sooner.
Remember that nothing is ever guaranteed in the market – it can do anything at anytime. As technical traders, we simply work with probabilities.
Verdict: One for the watchlist
Having remained unbroken for the past 14 years, this level of resistance (supply zone) at 6868 has held for 14 years and has behaved like a true brick wall, obstructing in the way of price meeting the all-time-high.
Over the last 15 months, price has rejected this pen-ultimate all-time-high no less than 7 times. On each occasion, it bounced and price fell away. On 4 out of the 7 occasions when it rejected this level, price fell away dramatically in contrast to the 3 occasions where price was hesitant to fall in value (on the 3 instances between May – July 2014).
So what’s in store this time round?
Well, as this level has held for 14 years and has been rejected by price 7 out of 7 occasions, the odds are stacked in favour of a potential sell. This is what the odds suggest.
So how can we play this?
It’s not quite ready to trade yet. Hold your horses! Now is the time where the frequently overlooked and undervalued skill-sets of patience and discipline come into the game.
Firstly, we want price to come to the level. We have the 6868 level in our sights, now we want price to test it again, just like it has before.
The more conservative traders will simply wait for a price action-based sell signal to occur, off the level, in the form of a bearish pin bar reversal, doji, double inside bar or reversal pattern on the smaller timeframes and will look to trade this according to strategy rules.
The more aggressive option for some traders will be to simply trade this with a sell order just in advance of the level, with a stoploss 50-100 points above it. Even though this approach may seem to many like getting in the way of an oncoming train, if successful, the entry will coincide with the very start of the move down and the trader will be able to benefit from a “free trade” sooner.
Remember that nothing is ever guaranteed in the market – it can do anything at anytime. As technical traders, we simply work with probabilities.
Verdict: One for the watchlist
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