Technicals | Jun 14 2016
By Nick Linton-Ffrost
Reaction to 5225/5250 should determine direction for the next two weeks
The question for us is whether the last months trading has formed a bullish or bearish pattern. In wave count terms this equates to whether the rally in the ASX200 (XJO) from 4900 to 5425 is part of a 3rd wave which implies a rally to 5725 or is a ‘C’ wave completion which implies a pull back to 5100.
We suspect the markets reaction to the 5225/5250 level over the next 2-3 days will determine if last weeks dip from 5390 is a correction before heading above 5430 (refer chart 2) or a the start of a trend change towards 5100 (chart 4). These charts magnify the last two weeks trading in order to illustrate the minor wave count possibilities.
If the market bottoms around 5225/5250 (where ‘c’ = ‘a’) over the next 1-2 days and is followed by a move above 5275/5300 (chart 2) then the bullish count outlined below should come into play. However if the market trades below 5225 for more than 3 days then the bearish count may be on the cards.
Bullish count (chart 1) – assumes the market is trading within a 3rd wave which should terminate around 5725 ( where wave ‘3’ is 1.618 times the length of wave’1′). From there we would expect a 4th wave pull back before a 5th towards 5800-6000.
Bearish count (chart 3) – assumes the market has completed a ‘C’ wave which implies a move lower the 5100 (midpoint of the 9 mth range) over the next few weeks. Trading below that level would imply a test of 9 mth support around 4800.
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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