The Australia 200 index is within a few percent of its all-time high just above 6,850. The strong gains over the first half of 2019 have many investors and analysts worried that a big pullback is on the cards. However the RSI has already dropped from over-bought territory, and the chart shows the uptrend (blue line) remains intact.

One of the first things young traders are taught is that "the trend is your friend". Study after study shows that many trends persist beyond what would be expected if market action is truly a random walk. This is why so many successful trading approaches are based on momentum - they respect trends.

While the index remains above the uptrend line there is a higher probability of a test of the all-time high. A break through 6,850 would put the index in blue sky territory. Failure at that level could see a test of the trend, and any breach of the blue line would introduce significant downside possibilities.

 

 

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