The Australia 200 index has had a stellar run since December 24, gaining more than 16% in less than 3 months. However the price action is now pointing to weakening, and the potential for a correction could be increasing. Last week's miss on GDP numbers and softer than forecast retails sales growth follow an uninspiring February reporting season. It may be time for investors to batten down the hatches.
The chart tells the story. The sharp rise produced a very sharp up trend, illustrated by the green line. Action over the last two days has broken that uptrend. The MACD at the bottom of the chart is also sounding a warning. The black signal line has crossed the red, pointing to a potential sell indication. The MACD is alos showing bearish divergence, refusing to make new highs despite the index doing so over the last three weeks.
In my view the support / resistance level at 6,140 is a key. The index is sitting less than 1% above the level. Any fall through could be a sign of further falls to come.
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