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ASX 200 Technical Analysis: Long Uptrend Could Be Losing Steam

ASX 200 Technical Analysis: Long Uptrend Could Be Losing Steam

David Cottle, Analyst


What's on this page

ASX 200 Technical Analysis Talking Points:

  • The ASX 200 remains within its dominant uptrend
  • However, it looks tired and may need to pause
  • Where this process takes it could be key

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The ASX 200 is right in the center of a respected uptrend channel from January’s lows which has not taken it very close to a key resistance zone.

On its daily char the Sydney stock benchmark is sitting just below a band between 6239 and 6381 which last held trading sway between July and September of 2018.

Impressive Bounce. ASX 200, Daily Chart.

The top of that band represents a high which had not previously been seen for very nearly ten years. Of course, we know that the selloff which followed that high last year took the index all the way down to the lows of January. That being so there will inevitably be questions about the ASX’s ability to survive long in such a rarified atmosphere should it get back up there. After all, it has not ever done so for very long.

But a more pressing question might be whether or not the index can convincingly break into that resistance zone. It shows some tentative signs of exhaustion and a failure to push on beyond its most recent intraday highs (around 6239) on a daily or weekly closing basis might make those signs more obvious.

Of course, the uptrend is still very much with us and any pauses in the near-term could be no more than some needed consolidation. The index looks rather overbought, unsurprisingly, so some time to cool down may be no bad thing for the bulls.

Still, a closer look at the daily chart might suggest scope for the formation of a ‘head and shoulders’ pattern, with the shoulder coming in around 6200.

Topping Out? ASX 200, Daily Chart

This would be quite a serious ‘topping out’ sign, with a break below the current uptrend line perhaps the first clear signal that this could indeed be what we are dealing with. As evidence either way is likely to come fairly soon the uncommitted might want to wait and see at this point.

Its also worth noting that, while the index has regained the uptrend from February 2016 on its longer term monthly chart, it is in danger of making a lower high there this month, unless it can top those ten-year peaks.

Lower High In Prospect: ASX200 Monthly Chart

None of this is conclusive proof that we are at any sort of turning point, and a surge in global risk appetite could well put the fundamental bull train back on the rails in some style. But there are a few points of technical concern here that do bear watching.

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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