The ASX200 Rebound Could Appeal To Bears | JBH, GXY

The ASX200 is on track for its third consecutive bullish session. Yet this may not be enough to keep bears at bay, given the depth of the prior decline.

The ASX200 is on track for its third consecutive bullish session. Yet this may not be enough to keep bears at bay, given the depth of the prior decline.

  • Last week we outlined the potential for ASX200 to mean revert on the weekly charts and Wednesday’s -2.3% decline only reaffirms this view. Now trapped between the 50 and 200-day eMA’s, bears have made a half-hearted attempt to lift the index from its lows – which is something bearish swing traders would be prudent to keep a close eye on.
    We remain bearish below 6,600, the 50-day eMA sits between the 50% and 61.8% retracement levels to provide an additional zone of resistance.
  • From here, we’d like to see a bearish candle such as a hammer or 20bar reversal pattern to suggest the swing high is in. 
  • The 6,475.4 low is the initial target ahead of 6,400 where the 200-day eMA and August low reside.
  • A break above 6,600 invalidates the bearish bias.

JB Hi-Fi has been a strong performer this year, rallying nearly 75% since January’s low. Prior resistance around 33024 has been confirmed as support and acted as a springboard ahead of its breakout from a bull flag. It closed to record highs so there is potential for over-extension over the near-term, but it is difficult to argue with the bullish trend.  

  • The trend remains bullish above 33.24, so traders who prefer to buy the dip could seek bullish setups above this key level
  • Intraday bulls could wait to see if 35 (prior resistance) holds as support

Galaxy Resources has been the bearish trend that has kept on giving. The market topped in January 2018 and has been in a steep decline ever since. Now trading at its lowest level since March 2016, we’re seeing the potential for a short and for it to head towards the Feb 2016 low.

  • The daily trend remains bearish below 1.18, although there’s the potential for mean reversion given RSI dipped into oversold yesterday and prices closed beneath their lower Keltner band for a third consecutive session.
  • Bears could consider fading into minor rallies below the 1.00 – 1.05 area, or wait for bearish reversal candles (such a hammers, pinbars or 2-bar reversals etc) to form below 1.05, before assuming a swing high in in place.

Related analysis:
ASX200 Mean Reversion Could (Finally) Be Underway
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