Colin is away for a couple of days. In his absence, I've posted notes for chart signals on a couple of markets that caught my attention today.
We are in one of those situations where the chart of the Australia 200 CFD looks a little different to the actual S&P/ASX 200 index This can sometimes happen. Mainly because the Australia 200 trades pretty much around the clock while the index is open only between 10 am and 4.10 pm.
This difference can sometimes be useful. In some cases it can pay to wait for both charts to confirm a technical signal. In others, you may choose to do the opposite, using a break out on one chart as an early signal for the other depending on your overall market read.
Looking at the, physical market below, the last 2 weeks range bound trading has formed a flag formation. This morning's break through the flag resistance might be seen as a bullish set up for continuation of the strong up trend leading into it.
The Australia 200 CFD chart below does not look so obviously like a flag. The basic market story is the same though i.e. a shallow sideways drift after a strong uptrend.
In this case a clear break above the previous high may serve as confirmation of the flag set up on the index itself. As I write, the market has failed to go on with things on the index this morning, so some confirmation may be prudent
If the market rejects this high again, the bottom of the flag on the actual index and the 20 day moving average on both charts are providing near term support. A clear break below this might suggest the correction is going to be more significant than the sideways drift of the past 2 weeks.
Aussie Dollar chart signals
The most likely scenario for what's going on now, based on my interpretation on the chart below, is that we are currently correcting the 5 swing rally from .8848 to .9756.
The first leg down in this correction bounced off the 38.2% retracement level in text book fashion.
Moving averages are also featuring in this chart. The .9758 peak rejected the 200 day sma and the Aussie is currently testing the support of its 55 day sma.
A text book example would have this correction going a bit further and breaking below the 55 day sma. This would make the 2nd leg down in the correction a bit more symmetrical with the first. A move back to the 50% or 61.8% retracement levels would achieve this. Time will tell
Crude Oil Brent chart signals
On the weekly chart the 200 week sma is tracking close to a trend line across recent major lows
On the daily chart, news that the West is negotiating to increase the scope of its nuclear inspections in Iran has produced a strong green candle and reversal day.
However,this has happened a bit above the trend line. So the question is this. Are we rejecting the trend line now? A move back above (or overlap through) the previous support at the dashed line would be a minor sign of strength. A more conclusive one might be a move above the 200 day moving average.
If neither of these things happens, the trend line may yet provide a useful tool for a buy set up if price drifts down to and bounces off that level