FTSE 100 Faces Sudden Downturn: Judas Swing Sparks Sharp Decline

Market Analysis – August 7

The FTSE 100 index initially experienced an upside breakout, followed by a retest and the formation of a swing high. This price action suggested a potential continuation of the uptrend. However, contrary to expectations, the price then sharply declined, plunging to the demand zone at 8009.50.

FTSE 100 Key Levels:

Demand Levels: 8009.50, 7898.80, 7750.00
Supply Levels: 8235.60, 8371.70, 8474.40

FTSE 100 Long-Term Trend: Bearish

In July, the FTSE 100 index formed a parallel channel as part of a corrective phase within the prevailing uptrend. A breakout from this channel was anticipated to indicate the direction of a major market move. The price did indeed break through the resistance of the channel, leading to increased volatility.

Aggressive traders likely capitalized on this breakout by initiating long positions, while more conservative traders opted to wait for a retest. Following the retest and the establishment of a new high, a continued uptrend appeared likely. However, the market then experienced its highest volatility of the year, characterized by substantial price drops and large-range candles, pushing the Average True Range (ATR) to its peak.

FTSE 100 Short-Term Trend: Bearish

Currently, the lower timeframes reflect a bearish trend, influenced by the bearish reversal observed in the higher timeframes. The false breakout to the upside before the crash is known as a Judas Swing. The Judas Swing can create confusion for traders, emphasizing the importance of stringent risk management practices. Market predictions can be challenging, as price movements may become erratic at certain times. Accurate forex signals are essential in navigating such volatile conditions.

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