Markets around the world have had a nice run lately including the FTSE100 but this pattern presents a risk. Using the EWU ETF as a proxy for the FTSE100 (they differ a bit but its close) the chart demonstrates the breakout from resistance on 1/2/13, the market retesting old resistance now support on 1/8/13 and the rally higher from there. If we look at the price action from 12/12/12 until now it forms a bearish rising wedge. According to Bulkowski a rising wedge has four required properties:
1. Two up sloping trend lines 2. Multiple touches 3. Three week minimum 4. Volume trend should be lower
This chart meets all the criteria except the last where the volume appears flat. As time has gone by I have discounted the value of volume indicators since HFT and dark pools diminish the accuracy of this indicator. For the signal to be nullified price needs to break out of the wedge and if it can price has more room to run higher.