ASX200 Update April 2015 (D,W)
Created on Saturday, 18 April 2015 02:06
Written by Austin Galt
Price has traded as laid out in previous analysis but I must admit to being somewhat bothered by my own expectations. However, as more trading unfolds, more clarity is gained. And with this my expectations have now changed slightly.
Let’s review the price action using the daily and weekly charts.
ASX200 DAILY CHART
We can see three peaks – a triple top. This triple top at 5996 is against the trend so therefore the probability is for price to bust above this level. Previously, I stated I thought the double top would hold. It did. However, I doubt this triple top will.
Before we get ahead of ourselves, price is headed down and price will need to find support shortly before really entertaining thoughts of price making new rally highs.
The Parabolic Stop and Reverse (PSAR indicator has a bearish bias after the dots on the downside were busted by Friday’s large price drop.
The Stochastic and Moving Average Convergence Divergence (MACD) indicators both have a bearish bias indicating the likelihood of lower prices over the very near term.
Major support is just below 5750 and is denoted by the lower horizontal lines. Breaking down below there will likely confirm the bear market is in progress.
There is minor support stemming from a recent low at 5828 which is denoted by the higher horizontal line. I favour price turning back up at this level. If price breaks below there then a test of major support will be on the cards.
I have drawn a Fibonacci Fan from a recent low to the second top in the triple top formation. This has already shown some nice symmetry with the recent third top at resistance from the 61.8% angle. Price has now broken below the 76.4% angle and I am now looking for the 88.6% angle to provide support.
I have added Fibonacci retracement levels and I am targeting the 61.8% level at 5843 to see in the pullback low. Price often clips the 61.8% level so I favour a touch below.
If price does make a pullback low as expected then I favour a move to new rally highs which busts the triple top in the process.
Let’s now move on to the weekly chart.
ASX200 WEEKLY CHART
We can see price has moved well away from the upper Bollinger Band which increases my confidence that a solid downtrend is not far off. Price is nearly back to the middle band which I think will provide the spring board for price to launch to new rally highs.
The PSAR indicator has a bullish bias after price busted the dots on the upside during the past week. Support, denoted by the dots, currently stands at 5832 which is further evidence that price may turn back up at the minor support level outlined in the daily analysis.
The lower indicators, the Relative Strength Indicator (RSI), Stochastic and MACD, all showed a strong high recently and I would prefer the final high to have at least one bearish divergence which looks likely if price were to make a new rally high now. The lack of a bearish divergence on this weekly chart is another thing that was bugging me.
I have drawn a Fibonacci Fan which shows price finding support at the 38.2% level after the first high in the triple top formation. I favour price now finding support at the 50% angle with the final rally high at resistance from the 38.2% angle. Let’s see.
Now keep in mind that the fourth attempt at resistance is usually successful but, as Gann noted, turning back down failing to make new rally highs is very bearish. Personally, I favour a false break high of the triple top formation but attention will need to be paid as price approaches the recent highs, if it does at all of course.
There is yearly PSAR resistance at 6081 so I would expect the final high to be below that level. Perhaps around 6050.
And once the rally high is in place, if it isn’t already, I expect a big downtrend to commence.