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ASX 200 Technical Analysis

  • ASX 200 attempting to overturn dominant downtrend from latter half of 2018
  • Bullish reversal pattern completion would entail climbing to reach 5,942 next
  • A rising support line may guide the Australian benchmark stock index higher

Check out our Q1 forecasts for global benchmark stock indexes in the DailyFX Trading Guides page

The ASX 200 finds itself in a very interesting spot as it attempts overturning its dominant downtrend from late August 2018. This is defined by the falling trend line from then on the daily chart below which has been broken and needs further confirmation. Prices are sitting right under the February 2018 lows around 5,795 after a near-term uptrend has led to about a 7% climb since bottoming in December.

Preceding the turn higher in the ASX 200 was an Inverse Head and Shoulders bullish reversal pattern. Simultaneously, positive RSI divergence showed that downside momentum was fading fast. At times, this can precede a turn higher in a given asset. Thus it was not too long until the neckline of the formation was breached around 5,658 towards the beginning of this month.

By taking the distance between the low and high of the Inverse Head and Shoulders (yellow arrow on the chart below), completing the pattern would entail reaching just under 5,942. This area coincidentally made up horizontal resistance back in October and November and may prove to be too much to breach. In the meantime, a rising support line from the end of 2018 is keeping the near-term uptrend in the ASX 200 intact.

A descent through it may open the door to testing 5,724 next which is the April 2018 low. Beyond that lies the neckline of the candlestick pattern mentioned above. You may follow me on Twitter @ddubrovskyFX for more immediate updates in the Australian benchmark stock index and the Inverse Head and Shoulders formation.

ASX 200 Daily Chart

ASX 200 Daily Chart

**Charts created in TradingView

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter