Posted on by ColinTwiggs

ASX 200 at support

The ASX 200 retracement is testing support at 5300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Recovery above 5380 would suggest an advance to 5850*. A declining Shanghai Composite could impact on the resources sector. Reversal below the October 2013 low of 5150 is not likely, but would be cause for concern.

ASX 200

* Target calculation: 5450 + ( 5450 – 5050 ) = 5850

5 Replies to “ASX 200 at support”

  1. Hi Colin,
    This is what I can’t understand about drawing lines on charts – why did you choose to connect the tops of those two particular candles, which indicate the downtrend has been broken?
    I would have connected the top of blue candle on the 28th Oct to the top of the red candle on the 11th Nov – this then intersects with the top of the blue candle on the 2nd Jan – ie the downtrend has not yet been broken.
    This line is also parallel to the line joining the two lows on the 9th Oct and the 12th Dec – thereby creating a downtrending channel that the market has been in for 3 months.
    Different people see different ways of interpreting the same chart.
    Still I agree that if it breaks 5370 then its broken out of that channel.
    I enjoy reading your posts
    Cheers
    Drew

  2. Good question Drew.
    I try to keep the concepts of support/resistance and momentum completely separate.Trendlines and trend channels are momentum indicators, not support/resistance levels though the two often coincide. Trendline breaks indicate that the trend is losing momentum.

    Rounded tops are always a challenge, but I don’t see the period of October 28 to November 11 as indicative of the trend (momentum) until mid-December. Linear regression delivers an even steeper line.

    I would only consider the parallel lines as a channel if price fell to around 5000, providing a third point of confirmation for one of the two lines. Even then I would be wary because of the width of the channel and the low gradient. It is likely to evolve into a reversal or continuation pattern rather than a trend.

    1. Hi Colin,

      Thanks for your reply and explanation. I see where you’re coming from – I guess its a matter of experience, and not being to rigid with the rules. I understand most things in trading such as risk management, money management, position sizing, stop losses etc, but chart analysis for setups and triggers do my head in – esp in the ASX.

      Thanks again
      Drew

  3. On the monthly chart for the XJO, the candlestick for December (a dragonfly doji?) suggests a possible down trend approaching. The slow stochastic indicator indicates the XJO is overbought and is showing signs of a pullback. Although these are only indications and need to be confirmed.I am a bit pessimistic about the future.

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