Technicals | Apr 26 2016
By Nick Linton-Ffrost
Why the ASX200 can test 5700 over the next two months
While support around 5150 holds our minimum target at 5400 remains intact. This view assumes that the completion of five waves lower from 6000 to 4700 implies a bounce to the top of wave 4.
We suspect further upside is possible given the market has broken above the one year down trend line. If the XJO can hold above 5300 for 3-5 days will be looking for a rally to 5700/5800 (i.e. height of channel added to break point around 5150/5200 (chart 1).
It is also possible to argue that the drop from 6000 to 4700 is a major fourth wave within the seven year climb from GFC lows around 3150 (chart 2). Under this scenario the implication is for a major fifth wave ascent towards 6000 and potentially 6500.
Our bullish view will be negated if the XJO trades below 5100 for more than 3 days. In this event we would expect to see a pull back towards 4700.
Two ways to trade our view –
- Aggressive – buy using a 5250 limit placing stops below 5050. If the market trades above 5400 move stops up to 5200
- Conservative – wait for a higher low to form above 5200 before opening longs placing stops below that new higher low or below 5050.
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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