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| Subject: resistance level at 4,300 on the S&P ASX 200 | |
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Author: Monday, 2 Apr 2012=Daryl Guppy |
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Date Posted: 09:50:03 04/05/12 Thu Aussie Stocks Headed for Breakout, 4,700 Is Next Target Published: Monday, 2 Apr 2012 | 8:40 PM ET Text Size By: Daryl Guppy CNBC Contributor 10 7 Share The Australian market has been trapped in an investment-numbing sideways trend for the past six months. The resistance level at 4,300 on the S&P ASX 200 has proved almost impossible to crack despite frequent attempts. The breakout above 4,300 is exceptionally important for two reasons. CLICK TO ENLARGE -------------------------------------------------------------------------------- First, when strong resistance is broken it means that long-term selling pressure has finally been overcome. The more powerful the resistance level, the more powerful the breakout. Think of it this way, the market has been overwhelmed again and again at 4,300. The strong breakout above 4,300, moving quickly to 4,346 shows that most of the potential bearish sellers at this level have now been cleaned out of the market. The next batch of sellers typically sits at a much higher level. The result is that the breakout has a clear run up to the next, often much higher, resistance level. Any pullback towards 4,300 is a good entry point for a strong rebound from this resistance level now acting as a support level. The stronger and more prolonged the resistance level, the stronger it is as a support level when the level reverses its polarity from resistance to support. This is a major and significant trend breakout in the S&P ASX 200 [.AXJO 4319.80 -14.00 (-0.32%) ]. The second important feature of this breakout is the context of the longer term pattern development. This provides an answer to the question of how high this breakout might go. The S&P ASX 200 has developed an up sloping triangle pattern. The base of the pattern starts in October 2011. The base is not clearly defined by a single rise over the usual 3 to 10 day period. In an index this is acceptable because the index aggregates the behavior of 200 stocks. For target calculation purposes we take the midpoint of this rise and use this to calculate the measured move. RELATED LINKS Current DateTime: 09:01:24 05 Apr 2012 LinksList Documentid: 46933725 Aussie Markets at Turning Point as China Slows Further Australia's Mining Boom to Continue: Economist Mining Tax Will Not Impact Investment: Expert This gives an upside target of 4,700. A word of caution: as it's taken six months for the pattern to develop, there is a high probability it could take about the same time for the pattern to achieve its target. This breakout is not necessarily a smooth and rapid rise to the target level. We are looking for a 4700 target, but that may be towards the end of 2012. The next challenge is to define the rising trend as it develops. Our preferred analysis method for the trend uses the Guppy Multiple Moving Averages. Key confirmation of the sustainable trend break is when the lower edge of the long term GMMA moves above 4,300. Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC's Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests. CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk. © 2012 CNBC, Inc. All Rights Reserved Topics:Currencies | Australia | Technical Indicators | Charts | Market OutlookPrintEmail Twitter 10 7 Share CNBC HIGHLIGHTS» More: Blogs | Quizzes | Slideshows | Special Reports | Video Boom or Bust? It depends where you are. California Chicago D.C. Denver Miami N.Y. Seattle Texas Poll The Fastest Turnovers The Best Pick Private sector advocate Foster Friess appeared on “The Kudlow Report” to say he still likes Santorum's chances. Streaming Ban Enjoyed NCAA at work? Kiss it goodbye: more companies are restricting access to streaming sites. The Rich Don't Tweet Worst Airports... ...for connections: Whether it's their airlines or their weather, these airports make you wait. New Carry-On Fees 007, Beer-Guzzler James Bond purists, prepare to balk: the super spy will be drinking Heineken, not martinis. Top Earning Superheroes 3-D 'Titanic' James Cameron's 'Titanic' was a gigantic hit in only two dimensions. Will the 3-D version break records? Most Profitable Movies [ Next Thread | Previous Thread | Next Message | Previous Message ] |