Technical Analysis: ASX 200 Bounces at Key Support Again
- The ASX 200 has steadied yet again at what is clearly this years’ key support level
- However, by the same token its short-term downtrend endures
- This fascinating tug-of-war seems close to a result
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The ASX 200 index has again seen a graphic illustration of the almost magic powers of late-February’s support.
When I last took a technical look at the index, that prop was in grave danger of giving way, a circumstance which might have put Australia’s equity benchmark in a world of hurt.
But as it turned out that break lower proved no more conclusive for the bears than any other of their many attempts at it this year. Yes, the exact low of February 28 at 5675.30 did break. But support in that area clearly held and the ASX has staged a convincing fightback above the line. Indeed, it’s now at highs we haven’t seen since mid-May.
Still, it might not quite be time for the bulls to declare any sort of victory here.
For all the index’s recent vigor, it remains below a downtrend line which has been comfortably in place since May 1. It’s testing that line as I write (0215 GMT Thursday). But a daily and indeed weekly close above it would provide some reassurance that is currently lacking.
Buyers will have to break this downtrend if they’re going to avoid another retest of that key support level in due course.
Still, indicators such as the Relative Strengh Index suggest the index is not at this point “overbought” to any extent. That means they may have gas left in the tank to motor on above that downward sloping line. But they haven’t yet.
For the moment the index seems stuck between its recent lows and the year’s peaks, tantalizingly just below the 6,000 point. The current downtrend needs to be cracked if even this range-trading pattern is to be properly established.
--- 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.