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ASX 200 Technical Analysis: Downward Reversal Is Likely Contained

ASX 200 Technical Analysis: Downward Reversal Is Likely Contained

Nathalie Huynh, Contributor


Talking Points:

  • ASX200 Strategy: Bulls expect tighter target; range traders could prepare for dip buying
  • Support levels: 23.6% Fibonacci at 5059.6, then September-November support at 4918.4
  • Daily momentum is a leading indicator to changes of direction within the range

The ASX200 reversed from its triple top at 5.305 as we expected in last research. The stock index is heading to a short-term support level and 23.6% Fibonacci at 5059.6. Below that is 4918.4 firm support level that has held through September-November choppy trades. These two supports combined may prevent the ASX from further declines.

Daily momentum has been a leading indicator to the ASX index. Its earlier downturn signalled the downward reversal in ASX. At present, momentum signals are near the lower bound - an indication that the slide of ASX may be contained soon. Observation during the last 6 months shows that momentum signals rarely fell far below this bound.

The bears with short positions could adjust their expectation to tighter target, while keeping a close watch on support levels. For range traders or the bulls who look to buy at dips, daily momentum and its change of direction could be an early indicator.

Losing Money Trading Forex? This Might Be Why.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.