Technicals | Apr 03 2012
(Readers should note this story was originally published on Friday, so where it states "next week" this should be read as "this week".)
LAYMANS:
In regard to the patterns time has been running out for our local market with some clean, powerful price action required to give us confidence that our medium term target circa 4800 can be tagged. Whilst there hasn’t been much to cheer about in regard to the price action over recent times the XJO has shown some resilience this week which is definitely a big step in the right direction. Indeed, our concern for some time now has been that overseas markets have been continuing to bound along quite nicely whilst we’ve been very reluctant to follow suit. In that regard the tide seems to have turned over the past few days which again is a positive attribute.
Still, we can’t get too carried away quite yet despite some good gains being made seen since our review last Friday. The major hurdle to overcome is still the 4400 region which is going to be tough to crack. That said, we’re in exactly the right zone for a breakout to occur. With everybody and their dog focusing on this resistance area something has to give. If traction is to be maintained it would come as no surprise to thrust through our line in the sand with a degree of attitude next week. The reason being there will be plenty of short covering taking place if the recent strength continues adding fuel to the fire and plenty of weight behind the more bullish case over the medium term.
On the flip side, clear rejection early next week would mean the trading range that’s been unfolding since August of last year is here to stay for a while longer. Not something we want to contemplate at this stage of proceedings.
TECHNICAL:
One thing we mentioned during last week’s review was that if our labelling was correct with wave-B completing the symmetrical triangle nothing other than impulsive price action would suffice. Remember, wave-C should ideally be strong and impulsive in nature. Although we’re looking over a very short period of time impulsive price action has been seen. I mentioned a couple of weeks ago that there were two hurdles to overcome. The first being the upper trend line of the Elliott Triangle which is something that most traders and investors wouldn’t be paying particular attention to.
The fact that the pattern has broken to the upside is significant despite the overhead resistance still being in position. In other words half the battle has been won which can only add weight to the bullish case. With price now posturing slightly beneath the line of resistance we need to see a high volume breakout with anything less being reason for concern. It’s also important that a high close is seen which is something that was absent during the last attempted breakout back in October of last year. In terms of the much smaller degree patterns we couldn’t have asked for too much more.
There’s also quite an interesting pattern from a time perspective over the short term though we’ll take a closer look at that during tonight’s video. As always the analysis has to be balanced which means looking at the more bearish scenario. Although there’s no bearish divergence evident our oscillator is sitting in the overbought position both on the daily and weekly time frames. In its own right it’s not too much reason for concern though the fact that a stiff line of resistance has been tagged makes it much more significant. That’s not to say price can’t break higher with some conviction though it certainly keeps our feet firmly on the ground. That said, we couldn’t have asked for too much more since our last review. Hopefully the same comment can be made next week.
Trading Strategy
30/3:
Having seen four or five false dawns since August of last year it’s by no means a foregone conclusion that a sustainable trend is going to unfold. Yes, from an Elliott Wave point of view that’s exactly what should unfold which can only be viewed in a positive light. We’ll know soon enough as an impulsive movement straight up through the line of resistance will firmly cement wave-B as being in position. The next port of call will then likely be the wave equality projection with a chance that even higher levels can be tagged over the coming months. I can’t reiterate enough the importance of the price action next week as it could have long lasting implications to the much larger degree patterns. If the U.S. markets can resume their upward trajectory next week there is no reason why the breakout we’ve been looking for can’t materialise. It’s well overdue.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).
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Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
