Technicals | Oct 19 2015
By Nick Linton-Ffrost
Levels to watch are 5420 and 5150
Have the last two months' trading formed a bottom or is a bearish pattern emerging? The reaction of the market to the 5420 and 5150 levels should provide us with the answer.
Bottoming view
Trading above 5420 (ASX200) for a more than 5 days turns the odds in favour for rally towards 6000 over the next 1-3 months. A break above 5420 triggers a buy signal given it takes out the bottom of wave ‘A’ and trend line resistance. The 6000 target is derived from the height of trend channel added to break point at 5420.
Bearish pattern
If the market remains below 5400 and trades back under 5150 for more than 3 days the odds turn in favour of another leg lower towards 4600. The rationale for this scenario is as follows –
- the downtrend line remains intact and bottom of wave “A” is not breached therefore the medium term trend remains bearish
- trading below 5150 would give the two month pattern a bearish shape (i.e. “abc” correction)
- the 4600 target is derived from the height of bear pattern subtracted from the estimated break point around 5000.
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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