Talking Points:
- ASX 200 plunged after failing to hold above the 5,380 level
- Index found support around 5,200 and formed a bullish reversal pattern
- The index reclaimed 5,380 and a higher hold could reignite bullish conviction
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The ASX 200 is trading higher today, after the index managed to move above the 5,380 resistance level.
The index was trading in a well-defined range between the 5,380 resistance and the 4,750 support until it broke higher in July.
The failure to hold above 5,380 in early September after the rally meant a return to trading in that range.
The index formed a bullish “Morning Star” pattern around the 5,200 support, and found upside momentum after breaking above the 5,300 level, as we suggested in the prior report.
The major line of defense at that stage was the 5,380-5,400 zone for potential resistance, and the break higher might now reignite bullish conviction if the index manages to hold above that area.
This scenario seems likely to shift focus for potential resistance at 5,500 followed by the 5,570-5,600 zone.
With that said, a failure to hold above 5,380 may be interpreted as a bearish development, and might have eyes on 5,300 for potential support followed by the last swing low.
ASX 200 Daily Chart: September 23, 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
