Now just shy of 7,000, bulls finally managed to break the index above the financial crisis highs.
- Healthcare and consumer discretionary sectors have continued to lead the way these past 52-weeks (and obviously the ASX200). Although it is Health care and consumer service stocks which have outperformed this week. In fact, even energy has outperformed, despite oil prices falling as geopolitical tensions receded.
- Financials remain in the doldrums although trade just above their 52-week lows. That said, the sector appears to be carving out a base and a break above 6,150 confirms a trend reversal.
Back in July we saw an intraweek test of the GFC (global financial crisis) highs. Yet it was short-lived. Instead, a bearish hammer closed below 6,800 and marked the beginning of a 7% decline. Since then, price action has been choppy on the weekly chart, but today’s thrust higher is a clear victory for the bulls; not only was it the most bullish week since February, but it comfortably cleared the GFC high. Overall, it looks very bullish.
There’s clearly demand around 6,700 as price action rebounded from the 26-week (6-month) moving average. Furthermore, the candles have left a double bottom / tweezer bottom formation.
Switching to the four-hour chart, we can see the final candle was relatively small heading into the close. We can take our direction from US market on Monday morning but, unless they push to new highs later today, we could expect a little mean reversion on Monday.
- Bias is for a break to new high after a minor retracement.
- From here, we’d like to see the 6581 – 6894 zone hold as support, so a retracement in this area could lull bulls back to the table and potential break it to new highs.
- Whilst a deeper retracement is still acceptable, a shallow one would be preferred as it serves as a testament to the strength of the bullish breakout. But it would become a little concerning if prices break and hold below 6,800.
- A break below 6,750 brings the 6,7000 lows into focus.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.