Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index. Welcome back to our regular feature on technical analysis and charting techniques. As always, these are simply for information and educational purposes only.

Well today I want to talk about a very simple idea. In fact this is so simple that you've probably overlooked it. But I want to talk about simple ideas and how to use these in a slightly different way.

Take a look at this chart. This is a FTSE 100 daily chart. I've marked off all the highs and lows for you. This is an uptrend, we can see that. But also we've got a momentum indicator on the downside. That's the relative strength index and I want to show you how we can start using these in a slightly different way.

The first thing I want to point out is that many traders use trend lines and one way to look at this is if it is in an uptrend and it breaks the trend line, there's an opportunity for you to go short and that's occurred on three occasions here.

So you could have extracted small amounts of profits because obviously this is an uptrend and the market has been respected by giving shallow retracements.

So if we move on and I start adding these trend lines to the indicator, you can quite often get slightly better results.

So here notice that once the trend line has been broken on the indicator that the market did indeed follow through and thereby giving you quite a few days to possibly about a week and a half's worth of profits.

Now on the second instance, we've also drawn a horizontal trend line. So once that was broken we noticed that the market only fell through for a short period of time, failed at that point there and then headed higher. But also, don't forget that when we're using trend lines we can connect the peaks on the upper side. So if the market is trending towards the downside and we connect these peaks to the upside, once the trend line has been broken, there could be a potential move to the upside. So, for example, on the 5,519 area, we noticed that the trend line has been cleared and then the market did indeed go towards the upside.

But right now, what are we noticing? Well we've got a high at 6,090. The trend line has been broken towards the downside. The market has only fallen through just slightly and it's heading back towards the upside at 6,090. There's actually nothing we can do at the moment until we start seeing peaks and troughs on the indicator itself, or unless we go into a consolidation phase. But at the moment, the way it stands is that the trend lines have been broken, we expect to see this market go slightly lower until we get further indications.

Now on the weekly chart, getting a slightly different picture. The trend line has been broken but the market has moved higher, but the indicator is now actually creating a lower high, so it's suggesting that there is a divergence in price in the indicator.

So, as I said before in previous videos, that the FTSE 100 index and other indices are at very interesting levels. I'd like to see if it's the indicator that is revealing that we could potentially be at the verge of a significant decline by more than 6%, or if we start shooting towards the upside, then the indicator itself has failed and of course, we don't know this until it has happened. We can only prepare for opportunities in advance. But at the moment, I'm looking at the indicator. It's showing that the move towards the upside may possibly be weak and I'd like to pay attention to that. So I would like to look for breakouts towards the downside if the market is going to follow through.

So be creative with some of your technical analysis and charting techniques. Markets can change dynamics all the time so we've got to try to adapt to market environments rather than using static techniques all the time. Test these across different timeframes and also look for other clues in the market. Don't just look for trend lines. Look for divergences. Look for patterns and any other subtle clues that are out there. Our job as a technical analyst is to improve our techniques, but also to remain open to ideas and open to potential market moves.

I hope this has been useful for you. I look forward to seeing you in another lesson. In the meantime, have a great trading week.