The problems on the FTSEMib index have not changed: the large lateral poses a high risk for people taking positions at this stage.
By Fabio Pioli, professional trader and founder of CFI Independent Financial Advisory (www.cfionline.it).
In last week’s article (“FTSEMib: A Great Acceleration”), and the future will be below 22,500 points, we wrote about how it was necessary to make an effort to be objective and, in being objective, despite similarities in weakness, the Italian market could no longer be considered bearish.
In fact, today we have more than 1,000 points above: in the area of 23,600. And it is exactly like this: we are sorry for the bears as we are sorry for the bulls but if you have valid criteria to read the lateral you realize that the Italian market is still in an adirectional phase (Figure 1).
Fig. 1. FTSEMib Future – Daily Chart
And here comes the risk, even if it is wrong to define it with the term “risk”, which means. owaza. More than anything else, it is a certainty: all small economists will lose money. The reason is that in the face of what will happen, that is, a market that will explode in one of two directions, they will make the same mistakes they have always made. What is wrong? They will be, first of all, if they have not already done so, an optimistic or bearish position (long or short) based on impressions. Then it will happen that the market (sooner or later) will start in the direction and it will happen that anyone on the wrong side, surprised by the increase in speed, will be stuck in the position or, if it from a loss, will suffer less greater than expected; who on the right, also kept off by the changing speed, will close prematurely and marginally find the position and then find himself in the same conditions as his antagonist in the next lateral.
On the other hand, the reason the market is predictable is that people always make the same mistakes. How to get out of this ongoing cycle of error? The solution is simple: first of all you need to have the strength not to perform surgery during the lateral. Prices, small fluctuations and long lead times are tempting: you want to do something. Well we have to resist and give up.
When should I come in? Only on clear signals that the lateral ends and the direction begins. This avoids both taking the wrong direction and staying too long in position without winning or losing. Third, you must also have a valid criterion for not getting out of a start-up trend too early or staying grounded in a trend that is rather over. As for future trends and speak only of the bears: the decline will be evident (eventually) only below the previous low of 21,065 points (Figure 2). So the advice is: apply the above principles and be patient.
Fig. 2. FTSEMib Future – Daily Chart
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