Technicals | Jul 13 2015
By Nick Linton-Ffrost
Medium Term View: Rally to 5800 over next 1-2 months followed by a correction to 5200
After a volatile two weeks the ASX200 (XJO) has carved out a range between 5400 and 5600. A break out of this range should produce a 200 point move. We favour the upside break above 5600 which would indicate a rally to 5800, while trading below 5400 implies a dip to 5200.
We suspect that the move lower from 6000 to 5400 (wave A) is now complete given the five wave count. The implication is for a 1-2 month sideways market trading between 5500 and 5800. This view is contingent on the XJO remaining above 5400 and breaking above 5600 pivot level and trend line. The break needs to occur with the next 3-5 days. Our excepted target would be around 5800 (height of channel added to break point). If this view comes to fruition we will be counting the rally as a B wave which should last for 1-2 months. Once that structure is complete the implication is for a decline towards 5200.
If the market remains below 5600 for more than a week and/or trades below 5400 the odds will turn in favour of a drop to 5100 – 5200 (i.e. bottom of major 4th wave). We would expect a strong bounce from 51000 ( say 300-400 points).
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Fifth Wave | fwtc.com.au                                             Â
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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