Australian Share Market - Close Up
The charts reflect these conflicting themes. This month, the action has changed from clearly upward to obviously sideways. The higher time frame charts are somewhat ambiguous, with the weekly and daily charts offering few clues to near term direction. It’s time for a close up look.
The four hour chart is also showing sideways action. However, the close up gives a clearer picture of where the important support and resistance stand.
The green lines are the “lines in the sand”. Trading up through 5560 could point to significant further gains, and possibly a test of the post-GFC highs around 5680. In contrast, the downside case is tougher to read. The 5500 level has acted as support during November, with a number of false breaks. This could lead to market caution if 5500 is breached.
While 5480 is a less well described level (less “touches”), some investors may prefer to sell on trading down through this mark rather than the more traditional support at 5500. When price action “rejects” a support level – by trading below and then reverting back above, further breaches become suspect. Trading a drop through the spike low, rather than the resistance, could offer a higher probability re-purchase opportunity.
Frequently Asked Questions about this Article…
The Australian share market has experienced a 400 point rally since mid-October, but the trend has shifted from clearly upward to sideways, indicating a decision zone for investors.
Despite weaker commodity prices, the broader market fundamentals remain modestly supportive, with a reasonable growth outlook and unstretched valuations.
Key support and resistance levels for the Australia 200 index are around 5560 for potential gains and 5500 as a support level, with 5480 being a less traditional but notable level.
If the 5500 support level is breached, it could lead to market caution, as this level has acted as support during November with several false breaks.
The 5480 level, although less well described, may be preferred by some investors for selling if the market trades down through this mark, offering a different strategy than the traditional 5500 support.
A 'rejection' of a support level occurs when the price trades below the support and then reverts back above it, making further breaches of that level suspect.
Investors might find a higher probability re-purchase opportunity by trading a drop through the spike low rather than the resistance, as this could indicate a more reliable entry point.
Significant global risks remain a concern for the Australian share market, although the article does not specify these risks, they are a factor in the current market dynamics.
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