While the ASX200 (XJO) holds above 5150 we are looking for a rally to the top end of the seven month range around 5400. This view is based on the assumption that the corrective rally from 4700 is a three legged structure which should carry to 5425 where wave (C) = (A).<\/p>\n
A confirmed break above the top of the range would imply a rally towards 6000 (i.e. height of the structure added to break point around 5400). Under this scenario our three count assumption would change to a five wave structure (chart 2) where wave ‘C’ morphs into a 3rd wave as it breaks out of the pattern.<\/p>\n
On the flip side if the XJO spends more than a few days trading below 5100 we suspect the odds will turn in favour for a descent towards 4700\/4800. A confirmed break below 4700 implies 4100 (height of pattern subtracted from 4800). In both cases at least 10 days trading outside the seven month structure is required before we would call a confirmed break.<\/p>\n
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\n![\"\"](\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/ffxjo79_2.jpg\")
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\nAnother trading idea from<\/strong><\/p>\n Fifth Wave |<\/strong> fwtc.com.au<\/strong><\/a> <\/p>\n FW generates over 150 Trading Alerts on the ASX100 each year. We are a subscription service specialising in short term technical strategies based on 27 years experience<\/strong>.<\/strong><\/p>\n AFSL 319830 |<\/strong> Disclaimer<\/strong><\/a><\/p>\n Reprinted with permission of the publisher.<\/em> Content included in this article is not by association the view of FNArena (see our disclaimer<\/a>).<\/em><\/p>\n Technical limitations <\/strong><\/em><\/p>\n If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.<\/strong><\/em><\/p>\n