XAO Index on course to test resistance at 6500

A post written on January 13, 2019, pointed out that a 6 month, 1000 point down-trend in the XAO had ended, and that technically there was a change in trend, creating a Buy signal.

https://technicality.me/2019/01/13/a-promising-start-to-2019-xao/
Six month daily chart of the XAO from Incredible Charts.

The updated chart above shows the following features:

  • On January 15 the All Ordinaries Index penetrated resistance at 5850 to enter the trading Zone B where it plateaued to form a triangular trading pattern. This ended an impulsive move of about 500 points, to a high of 5980
  • From a low within the trading pattern of 5930 the index broke-out to the upside on February 5, 2019, in another impulsive move higher to the last closing of 6,136.
  • Technical analysts have observed that such a second leg impulsive move is usually of a similar order to the first. i.e. 500 points. If replicated, it suggests that a target value of 6430 might be reached, as depicted above.
  • Continuation of the move higher will test resistance to entry into the Zone A trading zone as envisaged, with the final hurdle to recovery at 6500.

The greatest risk to the Australian market is almost certainly from the US markets

12 years ago prior to the Global Financial Crisis the Dow Jones Industrial Average was at 14,198 points on October 12, 2007. It took only a year and a half for the DJIA to fall 54.4% to a low of 6470 on March 13, 2009. In contrast to the Australian Indices which have still not recovered to the pre-GFC high, the DJIA, although slow to rebound, had by about March 8, 2013, 4 years after the onset of the crash.

12 year weekly chart of the Dow Jones Industrial Average.
Incredible Charts

The weekly chart above shows not only full recovery from the down-turn, but a continuing surge of the order of a further 90% gain.

Those interested in technical analysis will have noted that the index has formed a “double top pattern” warning of possible trend reversal, and the heightened turn-over volume of the last few years.

The important observation to now look for is whether the index resumes trending upwards, or whether lower highs are formed.

Disclaimer

This post makes no attempt to forecast future market movements and is for information only. Retail investors are advised to always seek the opinion of their stock-broker, or appropriate financial adviser.



Categories: Chart Review

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