Medium term
Trade view / 29 May 2015 at 5:23 GMT

FTSE100 gets ready to stretch

Instrument: FTSE100.I
Price target:
Market price:

The FTSE100.I has been a real laggard relative to, for example, the US and European equity markets since the setback that started on May 21, 2013. It is just recently that this market has managed to finally establish price action above that very peak set more than two years back. 

The overall structure in the FTSE100.I isn't a different story than, for example, the DAX.I or the OMXS30.I, as in those indices I am looking for a final fifth wave of the fifth wave from the European crisis low set back in 2011.

Looking at the price action from the bullish cycle that started in mid-October last year, I can so far see wave i, wave ii, wave iii and a possible wave four before an expected fifth wave higher. What is different in this index compared to many others, is that the FTSE100.I has managed to stay very close to its April highs during the recent weakness. This is the tale of strength from a relative perspective.

Looking at the price action from the mid-April peak and the one set on April 25, price is building a compressed pattern; a pattern that could very well be setting up to stretch higher in an extended cycle wave. Resistance is currently located at the 7,065 area and a break above this level could trigger a third wave breakout within the medium-term fifth wave cycle. These quite bullish prospects remain as long as this index can stay above support at the 6,920 level.

Management and risk description

The plan is to buy the FTSE100.I in anticipation of a third wave breakout. Since the third wave is often the strongest move in a cycle, both from a time and price perspective, we should be able to track price with a fairly tight stop. 

The buy trigger is a break above 7,065 with a stop at 6,920 and a target of 7,209, 7,383 and 7,500. Once the first target is reached, move the stop higher to the 7,000 level and consider taking partial profits. Once the second target is reached, move stop to entry and trade towards the third target.

I have two scenarios for the setup to trigger: one is an immediate breakout above resistance (shown in the immediate breakout count chart below); the second would allow for price to take a brief dip before turning higher (shown in the triangle breakout count chart below). In the second scenario it would be okay for price to fall back all the way to 6,930 without ruining the picture why it is important to wait for a break above resistance before going long in my opinion.

The risk with this setup is a fake breakout that triggers the trade only to reverse lower to take out our stop, thus possibly completing the bullish cycle off the mid-October lows.


Entry: Buy a break above 7,065

Stop: 6,920

Target: 7,209, 7,383 and 7,500

Time horizon: 1–4 weeks depending on target

FTSE100.I daily cfd chart - immediate breakout count
FTSE100.I daily cfd chart
FTSE100.I daily cfd chart - triangle breakout count 
FTSE100.I daily cfd chart

FTSE100.I daily cfd development chart
FTSE100.I daily cfd development chart
 Source: all charts Saxo Bank 
Create your own charts with SaxoTrader. Click here to learn more  

— Edited by Gayle Bryant

For more on equities click here

Non-independent investment research disclaimer applies. Read more
JulieDeiy JulieDeiy
This comment has been redacted
fxtime fxtime
FWIW I only have 7330 as my max high. The ftse100 constituents are heavilly biased to minerals and commods with a dollar value. Whilst they accrue a proportionally higher profit as the dollar rises and is brought back into sterling the commods market is weak. Oil and Ores need to rally to support any real ftse breakout as currently the banks which have an equal weighting to commods are putting exactly exciting the market at present.
Johan Berntorp Johan Berntorp
I wouldn't be all that surprised to see the Mining sector going on a bull streak, infact it might have started already. Appreciate your comment as always.
fxtime fxtime
FTSE appears to be having a stop run exercise today...not unusual for month end. However the break below the prior 7000 cash price level is a concern. This market must close above that former support level to regain momentum. A close this evening (9pm BST) below the 7000 value implies a retrace.
Johan Berntorp Johan Berntorp
Yes, I would definitely not rule out a test of 6 930 - 6 920 now. The US markets looks like it could do another 1 % on the downside from were markets need to turn higher not to get caught in a larger retrace lower in my opinion. An immediate breakout attempt appears to have failed for now...


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail