All Ordinaries Index Falters – Chart Review

Disclaimer

This post seeks to provide readers with general information, and makes no investment recommendations. It has been written for a technical perspective after the market fall on Friday August 1, 2014.

AORD Index

The All Ordinaries Index (All Ords) was established in 1980 and is perhaps the most internationally recognised indicator of the Australian share market. Encompassing the 500 largest Australian listed companies by way of market capitalisation, the All Ords constituents account for over 98% of Australia’s total share market value. The index code is XAO.

Chart Snapshot

Daily candlestick chart of the XAO over the past six months.

XAO retreats

XAO retreats

TA Observations

  • The index traded in a 32 point range from April to July this year, from 5355 to 5387.
  • An impulsive move higher commenced July 11 taking the share-price from mid-range, to break-out above resistance July 21, and reach a high of 5623 July 31.
  • Yesterday August 1, was the last day of the trading week. The day’s candlestick formed a bearish engulfing pattern. The 87.3 point fall before rebounding 11.8 points to finish the week at 5535.8 wiped out the week’s gains.
  • In percentage terms it was a 1.34% fall for the day.
  •  It represented a 50% retracement of the previous impulsive move.

Conclusions

  • The large true range fall of 1.55% yesterday, and the bearish engulfing candle appearance, suggest further falls in the coming week.
  • It will be a measure of the strength of the 2 year primary uptrend as to how much further the index falls.
  • Rebound respecting support (previous resistance) at 5520 would be positive for a quick resumption of trending.
  • Less positive would be rebound from the last low at 5433 (for a 3.55% fall)
  • Failure of this support to hold would raise the possibility of lower prices, and perhaps the start of a down-trend.
  • With further falls, the next support level to be tested would be at 5355.

It is likely to be a short-lived retracement and to present buyers with cheaper entry prices, but it should be closely monitored.

 

 

 

 

 

 

 



Categories: Chart Analyses, Trading opinion

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