Technicals | Aug 24 2015
By Nick Linton-Ffrost
Correction or trend change?
After breaking below the 4 year trend line the question is whether or not this move is a correction or a change in trend. We have outlined both scenarios below and slightly favour the correction view given the longer term trend remains north.
1. Correction = expect a bounce from 5050-5100
- the four year rally completed five waves at 6000 which implies a three wave correction to 5100
- target based on our rule of thumb where the market returns to the bottom of the 4th wave after a 5th completion
- three wave count where wave "a" = 6000 to 5380 and "b" = 5380 to 5725. Implication is for a "c" wave to 5100 where "c=a"
- bottom finding should take 3-4 weeks with a bounce target at 5400
2. A trend change implies a five wave decline to 4750
- the break of the 4 year uptrend channel implies a move to 4750 (i.e. height of channel less the break point at 5500)
- wave count assumes the "c" wave from scenario above morphs into a 3rd wave within a series of five
- timing to target = 5-7 weeks
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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