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Technical Analysis: ASX 200 Must Top Bumping Along the Bottom

Technical Analysis: ASX 200 Must Top Bumping Along the Bottom

2017-05-11 05:01:00
David Cottle, Analyst
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Talking Points:

  • Australia’s ASX 200 index has regained an established uptrend
  • But it hasn’t done so very convincingly
  • It will need to regain current range tops to convince, perhaps at the very least

It’s possible that ASX investors are contemplating a sigh of relief.

Why not? The broad Australian equity benchmark has managed to creep back above a quite well-established uptrend line, as can be seen from the chart below:

Technical Analysis: ASX 200 Must Top Bumping Along the Bottom

If it can go on to manage a weekly close above the line then the week’s slip below it will look like a spurious blip.

The uptrend was established on March 22 and had held since then until Tuesday of this week when the ASX slipped below it. However, the price action since failed to confirm that brief rejection and the index has regained the path higher.

So that’s that then? Well, not quite.

Even though the uptrend is still just about in place, it’s surely notable that the index hasn’t mounted a challenge to the upper boundary since April 11, and didn’t manage to get there even then. This picture gets even more troubling when we look at the longer-term uptrend in place since last November:

Technical Analysis: ASX 200 Must Top Bumping Along the Bottom

In one worrying respect this uptrend is the macrocosm of which the chart we looked at first is the microcosm. Here again we see a channel which, although just about in place, hasn’t been challenged to the upside for rather a long time. In this case since January 9.

And, as you can see, this week’s slide also breached the bottom of this, rather more significant uptrend too.

In short ASX bulls seem to be doing enough to hang on, but not enough to convince. If the index can’t spend a bit more time at least trying for the top of these channels, then it looks as though a break lower has to come.

That’s going to mean a serious try at current range tops near 5961. A consolidation above these is becoming an ever more urgent necessity for those with hopes of more upside.

--- 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.

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