Talking Points:
- Index finds support at the 5,500 area
- Daily close and a hold above 5,600 could imply that bulls are firmly in control
- Failure to move above 5,600 may indicate a short term bearish sign
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The ASX 200 is trading higher after finding support at the 5,500 area.
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 in recent weeks and broke the range bound “structure” with a move above the 5,380-5,400 resistance.
After the index surged higher for five consecutive weeks, buyers may have been pressured to take some profits, and a move lower initiated last week from the resistance area we highlighted in the last reports around 5,600.
At this stage, the move to the downside last week appears to be corrective as price currently sits above support at the 5,500 level.
A “higher low” at this stage may complete the technical bullish picture and indicate the long term uptrend may have indeed resumed, so a break and a hold above 5,600 might signal further bullish intentions.
Short term resistance could potentially be found at 5,700 following a break.
If the index fails to hold above the 5,500 level, support might be found at the aforementioned range highs at 5,380-5,400, which also coincide with the 0.382 Fib of this latest leg higher.
ASX 200 Daily Chart: August 8 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
