Technical Analysis AU200 : 2018-10-11

IFCMarkets Technical Analysis
IFCMarkets Technical Analysis

The Australian stock market index fell below its 200-day moving average while recent economic data were mixed. Will the AU200 decline continue?

The Reserve Bank of Australia left the interest rate at 1.5% at its October 2 meeting. Recent economic data were mixed: the balance of trade surplus rose to Australian $1.61 billion from A$1.55 billion in August, expansion in services sector accelerated and retail sales edged up 0.3% in August. At the same time activities in construction sector shrank in September as decline in building permits and new home sales continued in August. At the same time the AU200 breached and closed below the 200-day moving average MA(200). Other technical indicators are also mostly bearish. Bearish technical indicators forecast downtrend for AU200.

AU200 fell below MA(200) 10/11/2018 Technical Analysis IFC Markets chart

On the daily timeframe AU200: D1 has fallen below the 200-day moving average MA(200).

  • The Parabolic indicator has formed a sell signal.
  • The Donchian channel indicates downtrend: it is widening down.
  • The MACD indicator is below the signal line with the gap widening. This is a bearish signal.
  • The stochastic oscillator has breached into the oversold zone, this is bullish.

We believe the bearish momentum will continue after the price breaches below lower Donchian boundary at 5876.75. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed below the upper Donchian channel at 6230.65. After placing the pending order the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (6230.65) without reaching the order (5876.75) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Position Sell
Sell Stop Below 5876.75
Stop loss Above 6230.65

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