The FTSE 100 has entered into a consolidation phase following the recent decline we have seen since the beginning of August 2015. The consolidation has taken the form of a triangle pattern, and highlights a pause in movement as the security awaits the next directional catalyst.
The triangle formations are considered continuation patterns as they have a habit of forming before the trend, which preceded the formation, is resumed. The 20, 50 and 200 day simple moving averages on the chart (labelled 20MA, 50MA and 200MA) highlight the short, medium and long-term trends as currently down on the index.
However, it is prudent to wait for the breakout rather than pre-empting the move. The upside breakout level is considered with a close above 6235, while the downside breakout level is considered with a close below 6040. The height of the pattern (360pts) considers a proportionate move in the direction of the breakout when one does finally occur.
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