Ultimate target raised on ASX 200

Price at time of writing – 5350.

My recent update on the Australian market suggested a break above resistance in mid-September had opened the door to a new and higher trading range.

That resistance – centred on 5201 – marked a level on the chart measuring a 66.66% rise from the major low in March 2009. With the breakout now confirmed, I can raise the ultimate target to a band defined as 6175-6242, where an advance of 100% from this same low will be complete. The renewed buy recommendation, triggered on the pull-back to 5211, remains firmly intact.

Australia's recent change of government offers much hope for those seeking a business-friendly environment. The ASX 200 had underperformed notably in the post-financial crisis period, hamstrung by a rampant currency but also by an unpopular government dependant on support from independents and minority party interests. This messy situation had stifled investment and drained confidence from many sectors. The new political agenda will be forged not so much by the long-anticipated majority won by the Liberal-led coalition, but in the demise of the Green party vote. As a result, the balance of power in the Senate is now with the Palmer United party, led by flamboyant coal-mining billionaire Clive Palmer. Much of Australia's recent policy agenda is set to be turned on its head.

The path to 6175-6242 will have some minor levels of resistance to navigate. The first such resistance is a tight band with parameters defined as 5403-5425. Traders may wish to book profit within this band and step aside for an expected pull-back.

Recommendation: Stay long. Trading target 5403. Longer-term investors should note the bigger-picture target at 6242. Stop-losses can be activated on momentum below 5020.

ASX 200 chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.