Tradefair Weekly Update / Editor / 22 October 2008 / Leave a comment

Buzzwords of the week - Tip #14 A pivot low consists of three price bars, the middle one having a lower low than the two outside ones. A pivot high consists of three price bars, the middle one having a higher high than the the two outside ones. Pivot highs and lows on charts using weekly bars can represent important areas of support and resistance.

Welcome to the Weekly Update from Tradefair Spreads.

The turmoil in stock markets worldwide is for many traders something totally new, although those with a lot of experience may recall the turbulence of the crash of 1987 and similar turmoil in 1989. It is always a good idea to step back from the daily action to try to get a bigger picture by looking at weekly charts. The latest weekly chart of the FTSE 100 extracted from the Tradefair Spreads platform shows clearly the accelerating downtrend.

Tip: Change the timeframe on your chart

Get the bigger picture by changing the bars on your chart to a longer timeframe. If you are a day trader who usually looks at 10 minute charts to make a trading decision, look at the bigger picture using 30 minute or hourly charts. If you usually look at daily charts to make your trading decisions, look at the bigger picture using weekly charts.

Key levels for the FTSE 100 below here

In March 2003 the FTSE 100 hit a low of 3278; the highest point of the bull market which followed was 6754, achieved in July 2007. Over 75% of that bull move has now been retraced as of last week, and some traders are now expecting a full 100% retracement of that bull move.

During the transition from bear market to bull market in early 2003 some important weekly pivot lows formed at 3610 and 3626. If we go all the way back to 1998 there are also some weekly pivot lows around the same level, so those that believe these levels are still relevant will be looking to see if they check the current declines. If prices continue to decline beyond them other relevant levels are 3467 (the lowest weekly close of the last bear market), and the three lowest weekly pivot lows from 2003, 3392 (January) 3278 March and 3581 (April).

If those levels do not hold we may see once in a lifetime market action.

Until next week, happy trading

The Tradefair Spread Betting Team