As a trend trader I have focused much of my attention on the recovery of the indices and commodities since the beginning of the Coronavirus pandemic, as this has yielded many swing trading opportunities.
This month the Australia 200 index has particularly piqued my interest, as it has just now breached its previous all-time high, established pre-pandemic in February 2020, something that the major US indices did many months ago. This could signify further buying opportunities, as there is now no resistance level above the current price formed by previous price action.
Looking at the monthly chart of the Australia 200 above, I can see that price has broken to a new high this month, above the level set in February 2020. This level could now act as a level of support, with potential buying opportunities while price remains above here.
Looking at the weekly chart above, I can see that price broke to a new high two weeks ago, and I also notice a continued uptrend in price action with higher highs and higher lows. There is bullish moving average (MA) geometry, with the 10, 20, 50 and 200 EMAs lined up in the correct order and pointing in the direction of the uptrend. The MACD and RSI indicators are both strongly converging with price, suggesting that there may be further momentum to the upside.
On the daily timeframe above, I notice the same uptrend in price action, with corresponding bullish MA geometry and bullish convergence of the momentum indicators, suggesting there may be further bullish price action ahead. I will be awaiting a pullback down to the buy zone around the 10 and 20 EMAs, before looking for a small bullish candle to print in this area for a potential long opportunity. Since price has never been above the current level before there is no level of horizontal resistance above, and as such I do not have a target in mind, aside from keeping an eye on the major round numbers (for example 7,500). I will also look to the lower timeframes to find potential trading opportunities, as this may offer the benefit of finding a higher reward to risk opportunity than trading on the daily timeframe.
On the four-hourly chart, I can see an uptrend in place, with price action forming higher highs and higher lows, and the 10, 20, 50 and 200 (off the chart to the bottom) MA lined up and showing good bullish geometry. The MACD and RSI indicators are flat, which might suggest a temporary pause in the upside momentum before the next leg higher. The combination of this price action and the indicators suggests to me the potential for possible long trading opportunities.
The buy zone is the area in and around the 10 and 20 MA, and in fact the previous three four-hourly candles are in this area and have presented potential buying opportunities.
I am currently looking for a deeper pullback into the buy zone on this timeframe, where I will be waiting for a small bullish candle to print, and if this happens, I will use this as the basis for a long entry. Without a target in mind, it may be prudent to progressively scale out of the trade as price continues upwards, while also trailing my stop loss beneath the swings.
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.