The FTSE 100 index traded in an upward sloping channel which slowly pushed lifted it past the 6300 level late this afternoon. After closing out the third trade from this morning for a handful of points, I placed two more trades which were both based on MACD divergence setups. The first was closed out for a healthy profit and the second, a counter-trend trade, was closed out for a small loss.
Normal trading resumed after the Christmas holiday period and I expected the market to push up this morning given the overnight strength. We had a quick dip to support at the open before the FTSE shot up towards the 6300 level.
However, I ended up shorting the market following the MACD divergence as shown in the chart, and closed out for a couple of points as the market reversed off support following the hammer bar formation. The other two trades were textbook trades off key support and resistance levels.
It was one of those days where you would have been profitable just trading the divergence between price and the MACD histogram bars. The first trade would have been a loss or possibly a scratch trade if you played it tight, with the other three trades ending up as winners in my book. Note that A, B & C were class-A divergence patterns, and D a class-B setup, as indicated on the chart below.
My thoughts going into this week were as follows:
It’s a bank holiday here in the UK today, and I will not be trading – just watching the markets and the FTSE which is effectively mirroring the futures market as it does out of hours.
