Talking Points:
- The ASX’s fall has taken it through an important 2017 uptrend
- Consequently, the year’s range lows are very close to being in play
- Relative Strength indicators have yet to question the move lower
Give your ASX 200 trading strategy a tune-up with the DailyFX guide.
The last two sessions of falls for Australia’s main equity benchmark have been rather nasty.
For one thing,they’ve taken it below the lower bound of a significant uptrend channel which had been comfortably in place for much of this year. Since February 6, in fact.
For another the index is now flirting with support which was last in play back in March 23, in the 5688 area. Just below that lurks the low from February 28. But if they both give way, and they’re not far off, then the year’s range low will be worryingly in play. That’s in the 5589 area, last visited in early February.
To be sure this is a gloomy picture. And it arguably gets even gloomier when you look at the Relative Strength Index (it’s at the bottom of the chart above if you can bear to look). This momentum indicator has also moved quite sharply lower in recent sessions. But it is not yet in the sub-30 region which would suggest to most analysts than the ASX had been oversold and was perhaps ready to bounce.
In other words, RSI suggests there could be more pain to come for bulls. If you want a shaft of light in the darkness, you could cling to the hope that it may yet slip into that key, oversold area. It is now hovering right on the 30 line. If it goes any lower then bears may have the odd second thought.
But it hasn’t yet. Keep an eye on it.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX.
