Is ASX 200 Index Rebound Over?

Australia's ASX 200 Index has retreated from 5570 to 5195 since last Friday. Is the rebound from March low over?


Australia's ASX 200 Index has retreated from 5570 to 5195 since last Friday. Is the rebound from March low over?

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.

Build your confidence risk free

More from ASX

Join our live webinars for the latest analysis and trading ideas. Register now

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.

For further details see our full non-independent research disclaimer and quarterly summary.