Technicals | Sep 05 2012
Bottom Line 03/09/12
EW Trend: Corrective
Price Trend: Down
Trend Strength: Strong
Technical Discussion
LAYMANS:
In his last review Pete discussed how and why the ASX Materials Index (( XMJ)) was potentially looking at a near term bounce, but also discussed the numerous obstacles above were more than likely to hold back price from bouncing too far. As can clearly be seen we did get that bounce and we did see the minor overhead resistance stop the advance. For all intents the ongoing picture remains negative unless prices can really accelerate up and through 10,500 which seems a little unlikely with the ongoing slowing of China. There is scope for yet another bounce, maybe toward that line of resistance at 10,500 but we expect that yet again any strength will be thwarted and the larger down trend will resume. Downside target remains 8,250.
TECHNICAL:
The falling wedge pattern discussed last month did indeed to an upside breakout, as they tend to do more often than not. Technically the target for wedge patterns is back to its starting point which is more or less exactly what occurred right here. Also note that the start point of the wedge was also a very minor line of resistance which has now be validated and that little more important now. Because the larger wave structure remains corrective we have labeled the low as wave-(a) which sits within the broader wave-C. From the wedge breakout we're probably trying to bounce is a 3-wave pattern to complete the intermediate wave-(b) before turning lower one last time and head toward the target zone. This wave-(b) may have the capacity to challenge the minor resistance line but we'd view the 10,000 to 10,500 zone a sell zone if it comes into play. As was mentioned above, the only way to come to a bullish proposition is if the 10,500 resistance line is penetrated with force and with clean price action from below. Possible, bit not probable.
Trading Strategy
With the current trend pattern the only position here is short side but as we expect a renewed bounce a little patience will allow a much better level to be had. Minor resistance at 10,000 may not be enough to hold it back, but just above with wave equality into wave-c should be an ideal level to start looking at the short side. Some more time needed but absolutely no reason to be looking at long side trades until 10,500 resistance gets taken out.
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). Risk Disclosure Statement THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES. 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.
