Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index, so welcome back to another lesson in technical analysis. As always, these are simply for information and educational purposes only.

We will continue to look at the markets using technical analysis and some of the lessons we've learnt in the past.

Now, take a look at this chart over here. This is the FTSE 100 daily. What is the thing that stands out the most? Well I have labelled a few elements for you. We know that the major high was 5,833 and then this was followed by a reverse head and shoulders pattern which we highlighted in a previous video and that's actually transpired quite nicely, so at the moment the FTSE seems to be heading towards the upside. But is this market going to continue higher? Are there any keys or any elements that we could be paying attention to?

Well this particular chart here, what I've done is added the 20-day moving average but also a momentum indicator the relative strength index. So what stands out here? On the daily chart we still have the higher highs and higher lows. Currently, the FTSE is trading below its 20 day moving average, but also we notice that as the market was heading higher we had a divergence on the momentum indicator. Now if you draw a horizontal trend line connecting the lows across that indicator we notice that we had a break followed by a move back towards the upside and then a break again. So two things: It's trading below its moving average as well as a break below the momentum indicator.

So what do we need to look for right now? The recent low is 5,630 and that's where the FTSE is likely to test. If we break below the 5,630 and a continuation with the momentum index, that would suggest that the 5,902 may be a short to intermediate term high.

Now on the weekly chart, though, there's a conflict of two elements here. The first is that the momentum index on the lower side of the chart has again broken through the weekly trend line, but the market itself is still above the 20 week moving average. So as long as the market is above the 20 week moving average, some traders would assume that this market is still bullish, but we do need to see a strong momentum and that's where we're failing to see these markets hold the highs. So the weekly chart needs to be watched very closely over the next two to three weeks. So if we start breaking below 5,630 and the 20-week moving average doesn't provide support, then it looks like we could be heading sharply lower.

Now also, as always, keep an eye on the candlesticks because if you see a reversal price pattern that could also be a clue as to something happening that you can't see on price bars.

Here we have a bearish hirami on a weekly chart. The red candlestick, the body of the red candlestick, as you can see, is contained within the previous white candle. Now we've broken below the low of that red candlestick so the trigger has already occurred. In other words, the weekly chart is suggesting that the move could now take place towards the downside. As long as we don't break above 5,902 we should start looking towards the daily charts as potential signals to initiate moves on the downside.

So the parabolic SAR has also given us a sell signal as well, so several indicators on the weekly charts are pointing to a bearish move. We just really have to wait and see how this transpires. So right now we are looking at opportunities for the bears. The bulls are going to have to really take these markets up to new highs to negate the bearish view.

So have a look at the overall market structure. Use the simply moving averages because they work quite nicely and the parabolic breakouts, one of my favourites, is always worth keeping an eye and of course, the candlesticks patterns are quiet useful. So once you start tying all these in together that should give you an overall picture and help you make a decision as to what the next move for you should be.

Well I hope this has been useful for you. I look forward to talking to you in the next lesson. In the meantime have a great trading week. This is Sandy Jadeja for CantosCharts Masterclass.