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ASX 200 start of a potential multi-week corrective decline

Short-term technical outlook on ASX 200/Australia 200 Index (Fri 26 Jul)



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Key technical elements

  • The Australia 200 Index (proxy for the ASX 200 futures) has staged the expected rally and hit the medium-term upside target/resistance of 6815/6850 as per highlighted in our weekly outlook report published earlier on Mon (click here for a recap).
  • After a rally of 3.10% from 17 Jul 20019  to yesterday, 25 Jul U.S. session high of 6834, the Index is now showing signs of bullish exhaustion where it has formed a daily “Spinning Top” right below its current all-time high level of 6851 printed in Oct 2019 coupled with a bearish divergence signal seen in the daily RSI oscillator at its overbought region in place since 05 Jul 2019.
  • Elliot Wave/fractal analysis suggests that the intermediate degree impulsive up move sequence; wave 3 in place since 03 Jun 2019 low of 6301 may have ended where a multi-week corrective decline wave 4 sequence should unfold next.
  • The hourly Stochastic oscillator still has room for further upside before it reaches an extreme overbought level which translates to a potential bounce in price action of the Index after a 0.8% decline from yesterday high of 6834 to today’s Asia session current intraday low of 6777.
  • Key short-term resistance stands at 6812 which is defined by the 61.8% Fibonacci retracement of the on-going slide from 6834 high to 6777 current intraday low and the former minor swing low seen in yesterday’s Asian session.

Key Levels (1 to 3 days)

Pivot (key resistance): 6812

Supports: 6795 & 6730 (50% retracement of rally from 17 Jul low to 25 Jul 2019 high)

Next resistance: 6851 (all-time high)

Conclusion

If the 6812 key short-term pivotal resistance is not surpassed, the Index is likely to undergo a corrective decline to target the next supports at 6795 and 6730 in the first step.

Failure to hold below 6812 sees the continuation of the up move to challenge the all-time high level of 6851.


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