ASX200 Final High Target (D,W,Y)
Created on Saturday, 21 March 2015 02:12
Written by Austin Galt
The ASX200 has moved up impulsively the last few days which leads me to believe the final rally high is still ahead of us. Let’s investigate.
ASX200 DAILY CHART
The recent move down failed to trade below the previous major swing low which was set in February at 5739. Instead, a higher low at 5748 was put in place. This effectively forms a bullish double bottom with the trend which generally leads to new highs.
Price is now back up challenging the recent high of 5996. I think price will find some temporary resistance here. This would set up a double top but as it is against the trend price should then turn back up and bust to new highs.
The Relative Strength Indicator (RSI) showed a quadruple bullish divergence at the recent high and while it led to a correction it appears as if that was not the end. Perhaps price makes a marginal new high now which sets up a bearish divergence before pulling back and then surging to new highs again with the final high setting up a triple bearish divergence. Let’s see.
The Moving Average Convergence Divergence (MACD) indicator is bullish again with the blue line now above the red line.
The moving averages with time periods of 50 (blue), 100 (red) and 200 (black) are all ordered as they should be with the blue line above the red line which is in turn above the black line.
ASX200 WEEKLY CHART
The Parabolic Stop and Reverse (PSAR) indicator shows the recent low was right at support and failed to bust the dots on the downside. So a bullish bias stays in force.
The Bollinger Bands show price left the upper band but was not able to get down to the middle band. I suspect price is about to have a final crack at getting back up to the upper band which currently stands around 6150.
The RSI looks like the next price high will be accompanied by a bearish divergence.
The MACD indicator shows the averages have come back together again but remain bullish and trending higher.
Let’s now check out the yearly chart and have a look at a target for the final price high.
ASX200 YEARLY CHART
I have added the PSAR indicator using both a tight and loose setting. We can see price has already busted the tight setting resistance. I thought that would be sufficient but it now looks like price is gunning for the loose setting resistance before any substantial correction will take place. The loose setting PSAR resistance is at 6081 and I now expect price to surpass that level.
I have added Fibonacci retracement levels of the move down from 2007 high to 2009 low and, as stated in the March newsletter, I favour the second scenario whereby price pushes past the 76.4% level and challenges but fails at taking out the 88.6% level which stands at 6420. I will settle for a rally high somewhere in between. For the time being let’s settle for a target of 6200. This is denoted by the orange horizontal line.
I have drawn a Fibonacci Fan from the 2007 high to 2011 low and I expect the final rally high to be around resistance given from the 88.6% angle.
The RSI showed a new high reading at the 2007 high so price should eventually make new all time highs in the coming years which is accompanied by a weaker RSI reading – a bearish divergence.
The Stochastic indicator has a bullish bias but it doesn’t look very strong and I favour it turning back down shortly.
Summing up, price keeps finding support at the last moment so the grind higher continues. But the game is just about up and the search for the final high continues in earnest.