Time to re-visit the ASX/S&P 200?

Price at time of writing – 5219.

My last update on Australia's benchmark index was on 12 August, with the index then standing at 5108.

My recommendation was to stay long on trades opened at 4775 – an opportunity that presented in June following the misguided pull-back to its G2 chart level – anticipating a short-term target of 5211. That target was achieved earlier this month, and as a result the recommendation reverted to neutral. Today I investigate whether it’s time to re-visit the Australian market.

My target at 5211 came courtesy of projecting a 12.5% advance from the minor low in June. It was token resistance, however, and was not supported by an alignment of other indicators. Typically, major targets in my analysis are defined where a tight band of three or more projected percentage lines form a cluster, with at least one line originating from a major historic low. Using these criteria, today's ASX/S&P 200 chart highlights where the major target lies in the future. That target band, defined as 6175-6242, is formed by an alignment of four percentages. Notably, it includes one line representing a 100% advance from the major low in March 2009. 

Over a shorter time-frame, there is a cluster of three percentages that form minor resistance between 5403-5425, and this band now becomes my new trading target. A pull-back to 5211 would allow an ideal opportunity to re-enter the Australian market with mitigated risk.

Recommendation: buy. Target 5403. Stop-losses can be activated on momentum below 5020.

ASX index chart


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