Market News & Analysis
Is ASX 200 Index Rebound Over?
Medion Jim April 22, 2020 6:39 AM
Recently, Reserve Bank of Australia governor Philip Lowe said the Australian economy is expected to contract by 10% over the first half of the year and jobless rate might reach 10% by June. After that, Let's see how the chart performs!
Source: GAIN Capital, TradingView.
From a technical point of view, the ASX 200 Index failed stand above 5870 (around the 38.2% level between the February top and March low) on a daily chart. It suggests that the index would be in a weak position of the downtrend from February. However, the index remains holding above 5120 (around the 38.2% retracement of current rebound). It means that the index would be in a strong position of current bounce. In addition, the candlestick is also forming a hammer, a pattern for potential bullish reversal signal. Besides, the 20-day moving average is turning upward and acting as support now.
Let's take a look on the RSI. It clearly shows that this momentum indicator is capped by a declining trend line drawn from January and is also supported by a rising trend line drawn from March. Therefore, the RSI also fails to suggest a direction. In this case, It would be better to stay at neutral position and wait for few more candlesticks.
If the index prices close below the 38.2% level of current rebound at 5120, it would enhance the bearish outlook and bring a deeper correction to 4845 (around the 61.8% of current rebound). A break below this level might consider a re-test of the March low at 4400.
Alternatively, if the index crosses above the previous high at 5570, the prices should reach 5800 (around the 50% level between the February top and March low) on the upside.