The ASX200 is currently positioned between two technical zones, a support zone below from 4925 to 5000, and a resistance zone above from 5440 to 5550. The ASX200 is also positioned just above the median line (thin black line) of a down trending channel marked by the two thick black down trending channel lines.
The upper trend line of the down-trending channel aligns with the top end of the resistance zone. This indicates that for the long term up trend to resume, the ASX200 must break above both.
The support zone at 4925 to 5000 is a strong area of support that straddles a significant technical level, being the half way mark of the 2008 bear market fall. That level, to be more exact, is 4986. This support zone simply must hold for the Australian bourse to have any confidence of a Santa rally and a positive 2016.
A double bottom, also called a ‘W’ bottom, has occurred over the last 2 months which is a bullish sign, adding further significance to the support zone from 4925 to 5000.
While the ASX200 remains caught between these two zones, investors can read into this being indecision and uncertainty on the part of investors in ASX stocks.
Having said that, all short, medium and long term trends start from a trough. The basic first step bullish patterns are in place. Keeping an eye over the next two to three weeks on the simple technical analysis constructs shown on the chart will provide an insight into whether the indecision and uncertainty shown recently by ASX investors will make way for more certainty of a decent trend developing or not.
Given the current technical setup an advance over the next 2 weeks at least to rise above the recent high of 5384 and then to test the resistance zone of 5450 to 5550 could be expected.
For the ASX200 index to rise as such, some of the ASX’s larger cap stocks will have to play a role. Of late, the large cap stocks have been the main culprits for the ASX200 recently visiting its significant support zone between 4925 and 5000.
We’ll revisit the ASX200 in two weeks’ time to see how the saga develops.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
