Bulls Hit Double Barrier

From its reconstituted history in the early 1990s, the ASX200 has been travelling in a well-defined upward channel. In 2003, the index was launched on a steep upswing within the broader channel, with the momentum driving the trend reminiscent of the forces at play during the late 1980s when the All Ordinaries (the benchmark at the time) exploded on the upside through its barriers, gaining a further 48% on top of an already historic run.

The shorter-term picture tends to put a damper on this scenario, at least for the time being. Zeroing in on the recent action, we find that on February 2 this year, at 4983, the index hit into a double barrier to the upside in the combination of the return lines of the broader 1990s channel and the shorter-term channel drawn from 2003. As the index tackled the double barrier, it experienced some near-term exhaustion of momentum and has been deflected, pulling back within a downward sliding phase which may continue to influence the index.

Oscillations may develop between 4820 and 4900, falling lower in an equal band towards a downward test around 4780. A break below would extend the downward slide towards 4750 with a risk towards 4600–4680 bringing it closer to the 2003 trend line before the overall upward path may be resumed.

A rise through 4920 would be considered favourable at this time and may avoid a further set back, but the odds weigh against such an action for the short term.

Regina Meani is an internationally recognised professional technical analyst, her website address is www.reginameani.com.au