European stocks continue to consolidate to many investors’ frustration. The best example is IBEX 35, the Spanish index, which has consolidated in a tight range for many months.

The bad news for investors is that this market doesn’t go anywhere. It just hovers in a 300-point area, between 9,300 and 9,600 points.

But there is also good news: the bias is bullish while the market keeps the current range.

In August, I argued that the IBEX 35 index was preparing for a run to 10,000. At that time, a running triangle was in the makings. However, in the meantime, the triangle transformed into a different continuation pattern.

Hence, the bias remains bullish as the index builds energy to break above the pivotal level.

The technical analysis picture shows apparent resistance at 9,600 and support at 9,300. Therefore, a conservative approach to trading the IBEX 35 index is to wait for a breakout.

A bullish breakout is not when the market trades above resistance but when it has a daily close above it. In this case, a daily close above 9,600 warrants a long entry.

The previous higher low should be the invalidation point. More precisely, if the market drops below 8,500 points (and closes there), it is a sign that the bullish scenario failed.

But if it doesn’t drop and breaks higher, traders may want to add some more on a daily close above the pivotal 10,000 level. At this point, the stop should be raised to the previous entry level, and the final target should equal the distance from 8,500 to the pivotal level, projected higher from 10,000 points.

That equals 11,500 points for IBEX 35 as a target for this bullish trading scenario.

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