The UK100 (FTSE) Index has remained sluggish over the past three months. Despite a strong summer move from the July high at 6,083 to the August low at 4,783, price is currently stalled. From this point forward the UK100 has failed to trade higher highs or lower lows moving into a 400 point range. Until a breakout occurs, range traders will have the opportunity to trade levels of support and resistance.
Fundamentally, worldwide exchanges remain flat and the UK100 is no exception. Traders remain skeptical of stocks, specifically after the 14% selloff described above. Governments around the world are now scrambling to try different forms of stimulus to spur economic growth with limited success. Until a firm plan of action falls in place we can reasonably assume present price action to remain range bound.
Taking Price in to a 4Hour chart we can see our well defined range on the UK100. Resistance is formed by connection our highs of August 16th, September 1st, and September 15th near the 5,400 mark. The CCI (commodity channel Index) can help us determine entry near resistance. Range traders will wait for the indicator to turn back below 100 prior to entry.
My preference is to sell two lots of the UK100 on a crossover of CCI from oversold levels. Orders should be placed as near resistance as possible at 5,375 or better. Stops should be placed 200 points away coinciding with half our range distance. Limits should look to first target 5,175 with our first lot and then 4,975 for our second target.
Alternative scenarios include price breaking through resistance and moving on to new highs.
Additional Resources
Walker England contributes to the Instructor Trading Tips articles .To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
