Index: Britain's FTSE 100
A glance at the weekly performance chart of FTSE 100 shows formation of an inverse head-and-shoulder pattern. A sharp spike post Brexit on 24th June 2016, completes the symmetrical shoulder formation. FTSE enters back a strong supply area where it last stayed more than an year ago and faced a sharp drop from 6630 points to 6130 points.
So what next from here? Being in the supply zone (rectangle in the chart) means there is going to be a pull-back in the short-term, so within a few weeks. Post this pull-back, the FTSE will either continue to drop as likely correction in global markets is anticipated. This might take FTSE to the lows seen in early 2016. On the contrary, British companies might shrug off the Brexit impact, benefit from the new approaches/ties with the EU and the non-EU states. And a complete reversal in FTSE 100 can be seen. If this happens, so if the index manages to break-out from the first/current supply zone (red rectangle) post a pull-back, it will go all up to the second supply zone (blue rectangle).
The signs of either direction will be visible enough to devise a short or a long trading strategy respectively, on the index.
Lets keep tracking this for next few weeks and see which direction the index takes. Meanwhile feel free to leave your predictions in the comments here. See you soon with some further interesting observations and trading suggestions!