Technicals | May 23 2016
By Nick Linton-Ffrost
Trading this week should set the tone for the next 1-2 months
The bottom line for us is whether the rally up from 4900 for the ASX200 is a 3rd wave or a ‘C’ wave. This weeks trading should answer that question and set the tone for the market over the next 1-2 months.
Upside – if the market holds 5250/5300 support and spends more than 2 days trading above 5400 we will be expecting a move towards 5700 within 4-6 weeks with an outside chance of 6000 in 3 months.
Under this scenario we will be marking the rally from 4900 as a third wave which should extend to 5675/5700 (1.618 times wave ‘2’). This level coincides with the height of channel target derived from the line break at 5100. Our 6000 target is the height of the 7 mth rectangular pattern added to the 5400/25 break level.
Downside – if the market remains below 5400/5425 and trades under 5300 for more than 2 days we will be looking for a dip towards 4800. Under this scenario we will be assuming that the major “C” rally from 4700 to 5425 has completed its move after breaking down into three minor waves where (c) = (a) in both price and time.
Trading below 5250 should morph the last 7 days trading from a minor bullish zig-zag pattern into a bearish impulse structure and set up a move below the top of (a). Trading beneath (a) improve the odds for a test of the support line around 5100/50 and a break below that level would imply a 4800 height of pattern target.
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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