Featured Trade: ASX 200 at risk of a bearish breakdown

Potential bearish breakdown in ASX 200 below 6200 key short-term resistance.

Short-term technical outlook on Australia 200 (Tues, 18 Sep)

Key technical elements

  • As per highlighted in our latest weekly technical outlook report published yesterday, click here for a recap, the Australia 200 Index (proxy for the ASX 200 futures) has indeed staged the expected push up within its minor “bearish flag” configuration in place since 07 Sep 2018 low of 6100. In yesterday, 17 Sep U.S. session, the Index’s earlier push up since Asian session stalled right at the upper boundary/resistance of the “bearish flag” at 6200 which also confluences with 38.2% Fibonacci retracement of the recent decline from 30 Aug 2018 high to 07 Sep 2018 low.
  • A “bearish flag” configuration is a type of range consolidation that tends to form after a swift decline in price action (i.e the recent decline seen in the Index from 30 Aug 2018 high to 07 Sep 2018 low) before another potential downleg phase materialises. Based on Elliot Wave and fractal analysis, the price action consolidation seen in the aforementioned “bearish flag” may have come to its tail-end where an impending potential bearish breakdown can occur next.
  • The 4-hour Stochastic oscillator has flashed out a bearish divergence signal at its overbought region which suggests a slow down in momentum of yesterday’s push up. This observation supports the bearish breakdown scenario in price action.

Key Levels (1 to 3 days)

Intermediate resistance: 6188

Pivot (key resistance): 6200

Supports: 6145, 6100 & 6050

Next resistance: 6250 (medium-term pivot)


Therefore as long as the 6200 short-term pivotal resistance is not surpassed and a break below 6145 (the lower boundary of the “bearish flag”), the Index is likely to see the start of a new potential downleg phase to target the near-term supports at 6100 (the recent 07 Sep 2018 swing low area) follow by 6050 next (the congestion area of 07/14 Jun 2018 & Fibonacci retracement/projection cluster) in the first step.

On the other hand, a break above 6200 put the bears on hold for a further corrective squeeze up to test the 6250 medium-term pivotal resistance (the pull-back resistance of the former “Expanding Wedge” range support & 50% Fibonacci retracement of the recent decline from 30 Aug 2018 high to 07 Sep 2018 low).

Charts are from City Index Advantage TraderPro

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