Asian Open Strongest week in two months for the ASX 200

(Click to enlarge charts)

What happened yesterday

The Germany 30 Index (proxy for the DAX) has tested and reacted off the 9740 short-term pivotal resistance. In the U.S. session, it has shaped the expected decline and it is now coming close to our short-term downside target at 9300 (printed a low of 9420 in Asian morning session).

Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• The Germany 30 Index (proxy for the DAX) is coming close to our medium-term support at 9300 (lower neutrality zone as per highlighted in our latest weekly outlook/strategy). The 9300 support is defined by the range support area of the “Black Monday”, 24 August 2015 and 29 September 2015, Fibonacci cluster and the lower boundary of the descending channel (see daily chart).
• In the shorter-term, the Index is evolving within an “Expanding Wedge” configuration with its lower boundary (support) at 9070/45 and upper boundary (resistance) now at 9630. This type of chart configuration usually precedes a mean reversion/”snap-back” in price action after a steep decline in place since 01 December 2015 high.
• The daily (medium-term) RSI oscillator has continued to flash an impending bullish divergence signal which suggests downside momentum is waning. This observation supports the risk of the mean reversion/”snap-back” in price action as per abovementioned.
• The hourly (short-term) Stochastic oscillator has also dipped into its extreme oversold level which suggests limited downside potential at this juncture.

Key levels (1 to 3 days)

Supports: 9300 & 9070/40

Resistances: 9630, 9930 & 10165

Conclusion

The Index has plummeted and it is coming close to the 9300 medium-term support (lower neutrality zone). Technical elements are mixed at the moment, thus it will be prudent to turn neutral now between 9300 and 9630.

Only a break below 9300 is likely to open up scope for a further decline to target the next support at 9070/45.

Disclaimer

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