In such a busy phase we usually give some advice which in the past has been very useful. Let’s do it one more time: this is almost always the case, before each descent the oscillations stop and sleep occurs
By Fabio Pioli, professional trader and founder of CFI Independent Financial Advisory (www.cfionline.it).
How important is this phase of the market! And how much it is dangerous for those who cannot perceive its grandeur and criticality! In fact, there is talk of forming assets, preserving assets or burning assets but in the radar of the average investor there is flat calm, apparent tranquility, no or almost no worries.
It is almost always like this: before each descent the oscillations stop and sleep occurs; the antennas that signal danger are lowered and one is taken aback by the fall (see what happened in 2011, in 2015, in 2018, in 2020 (Figure 1). And every time we were here on these pages of SoldiOnline to predict it , do you remember?
Fig 1. FTSEMib Future – Monthly chart
But this time it’s even worse, much worse. Because the average saver has become addicted to the drops and no longer sees them as a risk but as an opportunity. He is doubly asleep (please forgive me for the crude language but otherwise you are not effective in waking him up).
In fact, in this period I hear many who say: I was wrong in the past (usually pre 2020) to buy ENI (or Intesa Sanpaolobut the examples are many) but I was good at keeping them and now I earn.
A huge mistake is mistaken for a test of skill. The mistake of having bought badly is forgivable by the market but the mistake of not managing the risk by selling at a marginal loss as soon as an unwanted direction is noted (stop-loss) the market pretends to forgive it once, twice but at the end does not forgive. Indeed, if we think about it, it is the only way to zero your capital.
I know well that I will not be believed because by now the positive experience is too rooted in the conscience of that type of saver but experience teaches me that sooner or later, on every security, on every financial instrument, the unexpected happens. But could this be the time or will it all be postponed? As we said in the opening of the article, this phase of the market is really important and great.
On the one hand, the long-term trend is objectively positive: with the holding of the 23,000 futures points on the FTSEMib, a level repeatedly identified as the long-term support, the market, as well as every single stock, stated that it is not bearish but bullish; so it could be ready to raise its head and exceed 28,100 points to travel towards 36,000, which is the projection of the lateral in force for more than 14 years now (Figure 2).
Fig 2. FTSEMib Future – Monthly chart
On the other hand, there is the figure on the daily chart, which appears bearish upon analysis and the strong side that has lasted for over 50 sessions which prompts a price explosion (Figure 3).
Both of these aspects do not bode well and if the graph were to tell the truth, below 21,065 there would be immense spaces of bearish opportunities and, unwillingly, the possible final game over for the type of saver we have talked about.
Fig 3. FTSEMib Future – Daily chart
How to settle the question? Gradually. First of all we consider that the level that acts as a ceiling relative to the descent (which was previously 26,000) now passes for 25,200 points. That level can represent, if exceeded, a reason for partial optimism. Optimism that would definitely prevail only above the 28,100 futures points on the FTSEMib.
Second: we at CFI have a possible short signal on the Italian index around 23,700 points. This eventuality, reporting probabilities in favor of more than 80%, could be very significant.
Certainly, as already written, below 21.065 points the bearish trend would be revealed to all.
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