Talking Points:
- Index held below the 5,600 resistance level, implying a possible short term top
- Daily close below 5,570 could put focus on 5,500 for possible support
- Correction may be needed to ease some pressure
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The ASX 200 is showing some bearish technical developments at the resistance area highlighted in the last reports.
After the index surged higher for five consecutive weeks, buyers may have been pressured to take some profits, and a correction might now be taking place.
The index was trading for the past months in a well-defined range between the 5,380 resistance and the 4,750 support, which coincided with the 0.618 Fib level of the long term up trend leg from 2012.
The ASX has seen impressive conviction to the upside lately and broke the range “structure” with a move above the 5,380-5,400 resistance.
At the time of writing, the ASX is trading below an area of resistance around 5,570-5,600 and a daily close lower than 5,570 might imply that a correction is in the horizon, initially targeting 5,500 followed by the aforementioned range highs at 5,380-5,400, which also coincide with the 0.382 Fib of this latest daily move higher.
A “higher low” at this stage will complete the technical bullish picture and indicate the long term uptrend may have resumed.
If the index manages to turn things around and move above 5,600, short term resistance could potentially be found at 5,700.
ASX 200 Daily Chart: August 2, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
