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ASX200: Overstretched

Technicals | Feb 07 2023

By Michael Gable 

Share markets continue to hold at current levels, with the Australian market looking a bit more overbought than the US.

We have recently seen some moves higher in the US dollar and a decline in some commodity prices, so locally we should continue to see a cooling off in the share prices of our large miners. At some point soon they will be a buy again, so that is one sector that we are keeping a close eye on.

Other stocks in our market appear to be breaking higher in the meantime. Many look to be over-extended, but we expect there to be opportunities around the corner once we see some share price consolidation.

This week's report has a chart on the S&P/ASX 200 to show how it is developing here.

The XJO is back near the old high, but it has achieved this by rallying up in a straight line. This is often unsustainable and we need to see how it reacts when some selling steps up to the plate.

The RSI is also indicating a potential turning point here (circled).

Just because the index is overbought, it doesn't mean that we will get a sharp decline from here. The index may consolidate sideways for a period of time before it is ready to head higher again.

For now, we just need to keep an eye on it and observe the price action over the next few days in order to get an idea if we get a sharp pullback or a sideways move instead.

Content included in this article is not by association the view of FNArena (see our disclaimer).
Michael Gable is managing Director of  Fairmont Equities (

Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services. 

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2


Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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