Clearly the three month support line between 4925 and 4950 is technically significant for the ASX200 (XJO). Trading below that level for more than a few days will most likely trigger technical selling and indicate targets between 4550 and 4300 over the next few months.<\/p>\n
If the XJO does break below 4925 our wave counts assumptions are as follows –<\/p>\n
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- we mark the decline from 6000 to 4950 (Aug low) as wave (A) and the two months trading between 4950 and 5400 as (B)<\/li>\n
- the dip from 5400 to 4950 and the bounce back to 5300 are the minor first and second waves within the (C) to 4300-4550<\/li>\n<\/ul>\n
The 4550 target is derived from subtracting the height of 3 month pattern from the break point around 4950. The 4300 target is where wave (C) approximates (A)<\/p>\n
Two quick points –<\/p>\n
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- Even though the three month support level is significant and should provide strong support we do not suggest buying around that level and setting stops below. We recommend waiting for a bounce from that level and then wait for a higher low to form between 5100 and 5200 before opening longs.<\/li>\n
- If you do open short positions with a break below 4925-4950 we suggest placing stops above 5100.<\/li>\n<\/ul>\n
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![\"\"](\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/ffxjo64.jpg\")
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Another 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