Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index. It's time for educational lessons and as always, these are simply for information and educational purposes only.

We're going to take a look at a market review. We're going to look at a chart that we've discussed in the past and which is one that has caused confusion for many traders right now.

Well, this is the FTSE 100 index and we looked at this chart previously where we saw a shooting star pattern which indicated a bearish reversal. Now of course we saw the FTSE drop off quite sharply and the last time we spoke about this, we noticed that there was another candlesticks pattern at the lower end suggesting that there could be a potential bullish move. We also looked at the parabolic SAR. That had also indicated a bearish move and of course, the FTSE complied and then fell sharply lower.

So what's happened since then? Has anything that we've learnt we could have applied helped us to make a profit on this market?

Well we notice that we've got a bullish engulfing candlesticks pattern which was also on the daily timeframe and the short-term hourly chart what we refer to as a double bottom and then since then what's the FTSE done? Well, it's rallied, so that pattern has played out quite nicely.

We also notice that momentum indicators were pretty much trading at their lows and we were also looking for a reversal in momentum. That's also occurred. So from the 5,594 the FTSE has rallied up. I mentioned previously that we could be facing resistance at 6,050 to 6,117 and the FTSE high was 6,101, so there is a potential right now that the FTSE could take out that 6,100 area and head into that 6,050 to 6,117 zone and if it does that, I would look for potential reversals at that point there.

Now there is no indication that the FTSE is struggling where it is right now as we speak on this chart. There are no potential reversal signals on the daily chart either. Momentum has also risen quite sharply. It hasn't created any new higher highs on the momentum index, but one thing that you could look for is the parabolic indicator because that's broken to the upside so that's suggesting at least on the short-term timeframe this market is still bullish. It will take quite a significant move for the FTSE to turn bearish if it were to break below the parabolic indicator. So really, this is going to be quite an awkward market for both the bulls and the bears.

For the bulls, we want to see a break above the 6,101. For the bears, we really want to come below 5,650 and that's where the parabolic indicator is right now. We would also see a turn in the momentum index.

Now one tool which I've talked about in the past which a lot of people tend to ignore is using trend lines. Now not trend lines on the market, but trend lines on the indicators.

So notice here we have a trend line connecting the two highs on the indicator. Once the indicator has broken above the trend line, the FTSE also had risen quite sharply. It's also above its moving average, but the moving average is flattening out, so that's suggesting that we might be stuck, or potentially stuck, in a sideways movement. So the 5,594, 6,101 are the two major levels. The bulls will have to get above that 6,100 area and the bears below the 5,500 in order to turn this market on the intermediate term bearish.

We could also, not shown on this chart, but we could also have put a trend line just below the momentum index and if the momentum index breaks below that trend line, that would give an early warning signal that the FTSE could be heading lower and we would also look for candlesticks patterns to suggest, or to comply with that suggestion.

So, at the moment, I would focus on the key candlesticks patterns which we've discussed in previous lessons. I would also look for the momentum to see if that's going to indicate when it's about to turn.

Remember, momentum indicator is based on price so it will be lagging just behind the price and then try to use this on multiple timeframes.

I've always suggested if you're looking at daily charts then look at the weekly and the monthly and if you're looking at the hourly charts then focus on the four hourly and then the daily charts as well and of course, respect the trend.

At the moment, the trend, on the short-term, is bullish, but the momentum indicator is looking a little bit overstretched and the moving average is pointing sideways, so there is some conflicting signals here on the FTSE 100 and I do believe that it is going to be difficult for the next couple of weeks. But I think that once we get the breakouts, there should be some very, very sharp moves ahead in the next months or so.

Well, I hope you have a great trading week. It's been a pleasure being with you here. I look forward to seeing you in the next lesson.

This is Sandy Jadeja for CantosCharts Masterclass.