Bounce Expected For ASX200

By Nick Linton-Ffrost

Bounce to 5500 expected. Near correction or medium term low?

The ASX200 (XJO) has achieved our near term downside target around 5350 which improves the odds of a bounce towards 5500 over the next 3-10 days. We have outlined two alternative strategies to trade the bounce.

Near term correction before a decline to 5050

• rally from 5100 in December to 6000 in April completed the 3 year rally and implies decline to 5050 (bottom of major 4th rule)
• A wave = fall from 6000 to 5380 July low and the rally from 5380 to 5725 is wave B which implies the C wave to 5050 is in progress
• therefore the drop from 5725 to 5325 is the first wave within C which with a target derived from C = A
• the implication is for a 2nd wave bounce over the next 3-7 days towards 5500 before heading
• contingent on the formation of a lower high below 5600 which should occur within 3-7 days
   

Medium term low implying a rally to 5725

• decline from 6000 to last week’s lows at 5325 is and A wave which breaks down into five waves where 5=1
• the fifth has also achieved the target at 5350 which is derived from the break at 5600
• these two indicators suggest the move lower from 6000 is complete and a bounce to the top of the 4th at 5725 is on the cards
• 5725 target based on our rule of thumb which assumes a bounce to the top of 4th after the 5th wave has completed
• the expected bounce should trace out three wave (abc) and take around 4-5 weeks to complete wave B
• the implication is for a C wave lower once the B wave is complete down to 5050
• view contingent on a higher low forming above 5300-5350
   

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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