Technicals | Feb 22 2016
By Nick Linton-Ffrost
Pullback expected to 4880 over the next week before a rally to 5400 over the next 1-2 months
Our view is based on the following –
- descent from 6000 has completed five waves which improves odds for rally to 5400 (refer last week's note for longer dated charts)
- 5400 target based on our “return to top of the 4th wave once five have completed” rule of thumb
- break of 6 weeks trend line implies a 5400 target which is the height of pattern added to 4880 break point
- failed break below the Sep-Oct 4900-5400 structure improves odds for a rally to the top end of range at 5400
- 5/20 moving averages crossed over and both pointing north. (MA’s cross overs are indicators not trading triggers)
We suspect the rally from 4700 to 5020 is the first wave within a five-legger to 5400 and are expecting a pull back to 4880 (wave 2) which would form a higher low. The rationale for the pull back is based on –
- minor five count within wave ‘1’ implies completion and improves odds for a pull back (chart 2)
- US markets have achieved near term upside targets (chart 3)
- a pull back should find its feet around the 4880 break level which is also the bottom of the minor 4th
Bear case – trading below 4880 for more than 3 days negates our view and would imply a test of 4700 support
Another trading idea from
Fifth Wave | fwtc.com.au
FW generates over 150 Trading Alerts on the ASX100 each year. We are a subscription service specialising in short term technical strategies based on 27 years experience.
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