The Aussie 200 (ASX200) has been a great example of how investors are looking for alternative investment opportunities around the globe. It is estimated that over $19 Billion in funds have left major indices such as the S&P 500 and the DOW, and moved into local Aussie based stocks over the past two years. As mining, manufacturing, and industrial sectors continue to boom, sentiment remains high for the Index as a whole.
Price however has yet to break and hold above the 5000 barrier over the past three years, with our current high being set in April 2010 at 5,019. This level has become a psychological barrier and has been tested at three key points in the last two years. A direction bias on this Index continues to be put on hold until price breaks out of our Chunnel pattern established on our weekly chart below.
Price Action
Zooming in to the 4Hr chart we can see price fast approaching our resistance line at the 5,000 figure. As well a rising Chunnel patter has been developing by connecting the March 16th low of 4,463 to the higher low of 4,770 established this month on April 19th. This is our first warning sign of an impending breakout, as price continues to narrow with this consolidation pattern.
Trading Opportunity
Due to the solid resistance at 5,000 on the AUD200, we have an opportunity to enter on a break higher or lower using entry orders. Orders to buy can be placed over the previous high at 5,019. If support holds, sell orders can be pending for a break of our 4Hr trend line near the 4,800 handle.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
