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ASX 200 Technical Analysis: Trapped By Fear Of 6000

ASX 200 Technical Analysis: Trapped By Fear Of 6000

David Cottle, Analyst

Talking Points

  • The ASX 200 looks pretty perky from the chart
  • But a glance at its performance within the current uptrend channel is more sobering
  • Can investors lose their fear of the 6,000 level

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A look at the unadorned ASX 200 technical chart must be quite sweet for bulls. After all there’s a strong, enduring uptrend which seems to have picked up the pace a bit since late March.

What’s the problem here? ASX 200, daily chart.

It’s only when we superimpose the current uptrend channel on the same chart that a less rosy picture emerges.

Bouncing along the bottom.

What we see here is that the index is perilously close to the bottom of that channel which has marked its long climb up from November’s lows. Indeed, it has not made any serious attempt at the channel top since reaching it back in January.

The index has been in the lower half of the channel since mid-February and has been bumping along the base of it since the end of March.

The problem here could be as simple as a single number. And that number is 6,000.

For all its proximity to current levels, topping that durably seems a sizeable psychological ask for investors. It probably should be. That level hasn’t offered them much beyond the opportunity to take profit since before the financial crisis.

This is not to say however that the index cannot beat 6,000, and even do so durably. But to keep the current uptrend in place investors are going to have to lose their fear of that level’s siren song. Maintenance of the uptrend will soon demand that they do.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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