The index lost 2% yesterday (early morning today for Australian time zone) and closed at 9,509.28 points. The recent high has been posted at 9,918 points last week (point F). The current level is 4.12% lower than this peak.
The weekly chart suggests a further correction. First, the recent price action failed to breakout above a resistance line (horizontal blue line) that was previously a support line. Let’s see this in details. The initial point was a high posted at 9,903 points in November 2003 (point A). Several months later, in 2004, the level around 9,900 points was a support area where several bounced were generated (points B, C and D).
One year ago, the sell-off easily cleared this level and drove the price to 6,470 points (point E, in last March). The rebound started in March has been already strong so far. Between points E and F, the index jumped by 53.3%. As a result, several indicators have posted extreme high values or have already started curving downward. This means that the weekly momentum has weakened and that a correction is probable. The technical Momentum indicator has soared and reached historical high value. This may be the set up of a trend reversal. The Orriols and Quantin bands confirm this swing and suggest a move back to 9,000 points in a first time. The Orriols (upper band) and Quantin (lower band) bands are like Bollinger bands but they are built with more sensitive standard deviations.
On a daily chart, the Relative Strength Index (RSI) has triggered a bearish signal on September 21st. Indeed, it crossed below the 70 line, out of the overbought area, and has been plunging for the last 10 days.
What could be the target on the downside? Well, as mentioned above, the area around 9,000 points may be the first one. But if the correction gains some strength, then the main objective could be the level of 8,200 points. This is the 50% retracement of the rebound occurred between points E and F, and it has already been a support level in last July (point G).
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Hi Gabriel,
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Uturn