Technicals | Feb 01 2016
By Nick Linton-Ffrost
Over the last two weeks the ASX200 (XJO) has failed to break below four month lows around 4900 and has traced out a five wave rally to 5050.
Based on these these indicators our best guess near term scenario is for a 1-2 day rally to 5100-5125 followed by a 3-5 day descent to 4900. Our 5100 target is where wave 5 = 1 and the 5125 target is the height of 4th wave added to break point.
The 4900 pull back target is based on our rule which states that after a 5th wave completion the market pulls back to the bottom of the 4th
If the XJO does pull back to 4900 we will counting that as the ‘B’ wave within a three legged corrective rally to 5300-5400 (where C=A). Our upside target range derived from our rule which states that after a failed break below a sideways pattern the market returns to the top end of the pattern.
Our ‘C’ bounce assumption to 5300-5400 will be negated after 3-5 days trading below 4850-4900 and would turn the odds in favour for a 3-4 week decline to 4500-4550.
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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