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ASX 200 Technical Analysis: Strong Rally Still Has Much To Prove

ASX 200 Technical Analysis: Strong Rally Still Has Much To Prove

David Cottle, Analyst

Talking Points:

  • The ASX 200 has gained sharply since mid-month
  • In doing so, it has crossed back above the 6,000 level
  • This is usually the point where reflection kicks in

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The ASX 200 has put in an impressive rally since February 9, sharing fully in global equity’s strong revival.

The index remains in a clear uptrend channel and doesn’t yet look either obviously overbought or lacking momentum elsewhere. So at face value the bulls have cause to remain in good heart even after such a convincing run higher.

However, the index is also back above the 6,000 level if not by much and when it comes to the psychology of trading the ASX, it’s hard to think of a more significant upside point. After all it’s been the level at which investors’ sense of adventure often deserts them for years, and with good reason.

A look at the monthly chart shows that the index has spent very little time above the 6,000 point in the last decade and more. Optimists might now point to the long uptrend in place since the financial-crisis lows of 2009 and suggest that the ASX now has a more solid platform from which to make a foray into the thin air above 6,000, but still, progress from here is likely to be measured and tough.

The bulls’ first order of business now must be to get the index back up the highs of early February, from where they might care to push on to this year’s peaks, which are also ten-year highs. It may be telling however that the current bull run has been unable to complete even that first task, impressive though it has been. The old ‘6,000 skittishness’ may be kicking in.

The uncommitted may want to wait and see if even that first resistance point can be retaken before stepping in.

Should the rally falter, the first Fibonacci retracement of the rise up from February 9’s lows can be found at 5988.8 with support below that likely at 5927.3

--- Written by David Cottle, DailyFX Research

Follow David on Twitter: @DavidCottleFX or us the Comments section below to get in touch

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