Technicals | Mar 07 2016
By Nick Linton-Ffrost
Why the 5150-5170 level is technically significant
Upside case (daily chart 1) – the ASX200 (XJO) has completed it’s descent from 6000 to 4700 via a five wave structure which implies a corrective bounce towards the top of the 4th at 5400. The 5400 level is also where wave (3) extend 1.618 times the length of (1).
Trading above 5150/70 for over 2 days further improves the odds of this call while trading below 5040 (top of wave 1) for more than 2 days turns the odds in favour for a southerly move.
Downside case (4 hourly chart 2) – assumes that the ascent from 4700 is a three legged corrective rally which should top out around 5170. Under this scenario the 3rd wave completes where wave (3) = (1) = 5170 and the market fails to push above the one year trend line around 5150/70. The 5170 level is also around the top of the near term uptrend channel.
If the market fails to push above 5150/5170 and trades back under 5040 for a couple of days this view will gain traction. The odds further improve if a lower high forms below 5170. Such a move would open up targets around 4700 (channel break target).
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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