Hello. Welcome to Charts Masterclass. I'm Sandy Jadeja, chief technical analyst for City Index. Welcome to another lesson in technical analysis and also how to use charts with different ideas and different techniques. As always, these are simply for information and educational purposes only.

Well, today I want to take a look at the review of the FTSE 100, the actual current position. By the time you see this, obviously the market is going to have moved, but the main key concept is try to teach you to look at the charts from an objective point of view.

Now we have discussed FTSE 100 in the past and I have quite a bit of feedback to say it's interesting where the current position of the market is right now and what's going to happen next. So that's what this lesson is going to be focused on is preparing for the move ahead.

Now, if we take a look at this chart over here, this is the weekly chart. I want you to try and have a look at this and to see what you can actually see. Now we have done this in a previous lesson, but try to see what stands out the most.

Clearly, the market is in an uptrend. We've got higher highs and higher lows, but currently, the index seems to be in a sideways motion so something should occur fairly soon because markets don't always stay static, they are going to move at some point. But there are some key things that are actually occurring on this chart.

Now the first thing is we've labelled this. Now as I said previously in one of our lessons, the market appears to be forming a fifth wave. An Elliott wave can be quite complex. We don't really need to get into that complex situation, just understand that markets do move in threes and fives and even sometimes eights.

So here we are actually at the fifth wave and that's what where we're seeing some hesitation take place.

Now that's not to say that the market can just reverse here and then head back down and it's not even to say that actually the market could continue higher. We don't know that. We can never know what's going to happen next. As a trader, all we're doing is preparing for an opportunity that is likely to occur in the very near future.

So right now we've got this fifth wave. What other information do we have?

Well, the main thing is that you have to look at the current trend. That's the first thing. But try to look for subtle clues because sometimes we overlook to see what's obviously there and if there are any signs of a reversal we can look at candlesticks to define these reversals because they're actually quite a good way to look at those. But the main thing is we need to lose our opinion. We've got to forget what we think is going to happen. We've got to actually look at the market because that's what's telling the story.

So bearing all these points in mind, if we take a look at this, the 6,090 high, we notice previously that there was a shooting star candlestick pattern. Now, the following week we had a spinning top and then following that, we had a negative week. Now in that negative week we'd actually broken below the spinning top, so that suggested that we could be heading lower and, of course, we would have initiated a short position. Our stop ideally should be just above 6,090.

And at the moment, whilst we're talking about the FTSE 100 index right now at this point in time, the market has risen slightly. It hasn't broken above the 6,090 high and it hasn't continued to the downside. So we're stuck. We have to just really wait and see what the market itself is going to tell us.

Now ideally for the bears we want to continue to the downside, head towards the fourth wave, preferably even lower than that if this is a marked top. If not and if there is potential for higher moves, then the high has to go above 6,090 and that would suggest that at the moment this was just simply a consolidation before a move to the upside.

But bearing in mind that we have seen a break towards the downside on that candlestick, at the moment we would assume that this is bearish until further notice.

Now the Parabolic SAR which we often talk about, what is that telling us?

On the weekly chart nothing has changed. It is still bullish. Now we have to understand that the Parabolic SAR is going to take time until the market itself catches up with the Parabolic SAR or vice versa, if the indicator catches up with price, until then, this is pretty much in a white space area. In other words, we still have to wait.

So there is still going to be some time to decide what the next big move is going to be. As always, we need patience. We're just going to have to stand aside if we're not in this position right now and if you're bearish, we're going to have to sit in that position unless of course our stop is taken out.

Now on the daily chart something different is occurring.

The daily chart we did see a fairly sharp move to the downside after that 6,090 high and we also broke below the previous swinging low. But after we had moved to the downside on the second attempt, we noticed that we had a bullish harami pattern and once the high was taken out, since then the FTSE is heading back higher.

But also notice that the Parabolic SAR on the daily chart is now negative. We have to pay attention to the weekly chart, so at the moment if on the daily chart we break above the parabolic SAR, that would indicate that there is still further upside in this index left.

So to be quite honest, this is a really interesting situation not just for the FTSE but many global indices and I think something is going to occur soon and volatility is going to pick up and that's why it's important to stay tuned to these lessons as well as to the charts.

So, always respect the larger degree timeframe; whether that's the weekly or the monthly. And then markets will do what we least expect. In other words, we sometimes want the market to do something and generally the market will do what it wants to do and we have to follow that. So we have to anticipate the next move and then follow it through.

Use the candlesticks patterns to assist with reversals whether it's short-term but, of course, they are going to be more important on the longer term timeframes.

And then don't over-complicate. In other words, don't try to make it too complex. Don't add to many indicators. Just keep it really, really simple.

Well I hope this lesson has been useful to you. I look forward to catching up with you in the next lesson. In the meantime, have a great and safe trading week.