Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index and welcome to another edition in learning how to use charts to forecast potential moves ahead in the markets. But as always, these are simply for information and educational purposes only.

Well something interesting is happening in the markets right now. Everybody is talking about what has happened with commodities, indices and various stocks, so it's really an interesting time for financial markets and I think there is some great opportunities ahead, so stay tuned to these videos on Cantos because we're going to keep you up-to-date as to any potential major moves.

We'll start off by taking a look at this chart here. This is one that has been talked about over the last two weeks. Something interesting has happened and, of course, the market has declined.

I won't tell you what this chart is. Some of you may already know just by looking at it, but the most important thing is by taking a look at this chart, what is the most important striking piece of information that stands out?

If we take a look at the right-hand side, we notice straight away that the markets are now curving off and that is suggesting that there could potentially be a topping formation taking place right now.

Previously, we had a major move towards the upside 68% followed by a 17% correction and then a secondary move from there which was a 27% gain and so far we've seen a 7% decline. Now, in this particular market you often see 6%, 7% declines, so this isn't to say that this is a start of a bear market as some people have been saying.

So what is this market? Well this is the FTSE 100 and it's the weekly charts that we're going to focus on today.

Now if we zoom in, we can notice, and we have discussed this before in previous lessons, that there has been a triple top formation and 6,050 to 6,117 had been my price target to the upside, 6,101, 6,05 is the area where the FTSE has topped out and we've seen this 7% decline from this potential high.

The real question is, is this a start of a major leg down or is it just another correction? Now that's something we're just going to have wait and see. But right now, there are some key pieces of information that we can look at to ascertain what our next move should be.

Clearly, the bears have been in control since the third high. We are really closing on that 5,594 level and that's really the major area we need to focus on because if we start seeing a potential waterfall decline, that level is more than likely going to be taken out.

But are there any other pieces of information that we can look at to give us vital clues?

Well this is the parabolic indicator. As you know, we keep a focus on this indicator for most of our charts. Now on the weekly, we had had previous parabolic breaks, but they had been minor pullbacks.

In other words, once we saw the parabolic break to the downside, we really didn't see a big selloff. The first one was a minor one. The second was slightly more. Who knows what this third one is going to be and that's what I said that the 5,594 area is something to watch out for, but right now, according to the parabolic indicator, this market is in a downtrend and also, if you look at your 20-week moving average, we are clearly trading below the moving average as well.

So there are several things that we can look at. We've got a triple top pattern, a break below the parabolic indicator and also a trade below the moving average and a close below the moving average. This all has bearish implications. So you could be looking at these three months down the line and saying that really was a major move to the downside, or you could be looking at it in three months' time saying that was a great buying opportunity. So what is it that we're going to do?

If we bring in the candlesticks we know that we had bearish engulfing patterns on the weekly chart. That's important. So this move is bearish. What we're really looking for is a number of things, actually.

The first thing we're going to look at is price and patterns. So we're going to look for a bullish indication on the candlesticks pattern. We ideally want to stay above the recent pivot on the 5,594 and then look for a bullish candlestick pattern to resume its current upward trend. If you wait for a close above the moving average or parabolic you're going to be a little bit too late because all indicators are lagging as far as we are concerned.

So let's see, the next couple of weeks we are going to keep an eye on this market to see if we can find a buy signal to recapture the move towards the upside otherwise what we could see potentially is a short-term move to the upside, a failure at the 6,100 level again and a lower high and then what we could see is a potential move to the downside which could be really, really, really nasty. So we really want to keep a focus on this market as well as the US markets.

Now the key support levels I'm going to give you to watch out for the next week or two is 5,600 which we're very closely trading towards and if we start failing below that level, then of course 5,445, which would indeed take out that major pivot and then really the scenario is going to change.

That would suggest that we've got lower highs and lower lows and the intermediate to longer-term trend could potentially be bearish again.

So we are really at a critical level on this market and as I said, we want to keep an eye on this market over the next few weeks.

So pay attention to the longer term and the intermediate term trends and that's why we focused on the weekly charts today. You can of course look at the monthly charts and then observe the major patterns and of course here we're looking at candlesticks charts. That's really important and wait for clear signals. Right now we don't have a clear signal to turn bullish. The clear signal is that this is bearish and so we're going to maintain that move until it completes and then of course, maintain protective stops. Use the daily charts if you are short and then look for bullish signals on the daily charts to exit those short positions to capture your profits.

Well, interesting markets ahead. We're going to stay tuned here at Cantos. I hope you have a safe and profitable trading week. I look forward to seeing you in the next lesson. In the meantime, have a successful week. This is Sandy Jadeja.