Day five: our Australia 200 trade

Technically my buy signal has been triggered on the daily chart and it looks as though the Christmas rally that everyone loves to talk about seems to be materialising.

Textbook theory would suggest buy orders should be transacted when the MACD is above zero, however if you had bought the Australia 200 cash (ASX 200) when the MACD (blue line) crosses back below the signal line (red line) since 2012, it is actually more profitable to buy the index below the zero line. Of course this is a fairly aggressive strategy, but seems to have a good positive expectancy.

I will look to exit the trade when the MACD (blue line) crosses back below the signal line (red line) on the daily chart.

The hourly chart is suggesting the index is a touch overbought, and momentum has started to pullback a bit, thus it may be worth looking to go long on a slight pullback. However the short-term trend is now higher and you can see this with stochastic heading sharply higher.

The downtrend drawn from the November high comes in at 5260, so this is a level that needs to be breached for the index to push through 5300.

It’s worth bearing in mind that with the Fed meeting out of the way liquidity could start drying up from here. 

Australia 200 cash

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