Technicals | Nov 09 2015
By Nick Linton-Ffrost
Break-out of the two-month trading range expected soon
How the ASX200 (XJO) reacts to the 5140 and 5300 levels over the next 5-10 days should determine the market's direction for the next 4-6 weeks.
Bear case – trading below 5140 creates a lower low and breaks below the zig-zag pattern line. The implied target would be 4700 (height of pattern less break point) with stop on view at 5270. If a decline eventuates we will be counting that move as a 5th wave, so the final leg in the move down from 6000. The implication will be for a strong bounce from 4700 back towards 5400 over the proceeding two months.
Bull case – under this scenario the assumption is that the decline from 6000 to 4800 is a major 4th which breaks down into three minor waves. Therefore the move has corrected some of the three year up-trend and the implication is for a major 5th wave higher towards 6000. A break above 5400 is required to trigger this view with a stop at 5250.
Such a move would create a higher high and break the 5 month down-trend line. A buy signal may also be triggered with a move above 5300 as it takes out the minor trend line created by the move lower from 5400. If an upside break does occur the target is around 6100 which is derived from height of trend channel added to break point as well as this years high at 6000.
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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