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ASX 200 index is slowly forming a dangerous wedge pattern

By: Invezz
Australia's banking giant to start offering bitcoin services

The ASX 200 index is in its fifth straight month as the stock market rally continues. The index, which tracks the top blue chip companies in Australia, jumped to a high of $7,742 on Wednesday after the strong GDP numbers. It is only a few points below its all-time high of $7,776.

Australia GDP data

The ASX 200 index surge is in line with what is happening around the world. In Japan, the Nikkei 225 and Topix indices have all rallied to their all-time highs.

Similarly, in the United States, the Nasdaq 100 and S&P 500 indices have been in a spectacular rally and are now sitting at their highest levels on record.

The same is happening in other countries like Japan and the European Union. As I wrote on Saturday, the Euro Stoxx 600 index has surged to historical levels.

This performance is mostly because of the view that central banks like the Federal Reserve and the Reserve Bank of Australia (RBA) will start cutting interest rates. Besides, inflation has fallen modestly in the past few months. 

The ASX 200 index jumped after Australia published strong GDP data. In a statement, the statistics agency said that the economy expanded by 0.2% in Q4, translating to a 1.5% YoY increase. The latter figure was higher than the median estimate of 1.4%.

Australia’s capital expenditure dropped by 0.2% but was offset by a 2% in personal consumption. Retail sales also rebounded by 1.1% in February.

These numbers mean that the Australian economy is doing well and has avoided a technical recession. As such, there is a sign that the RBA will deliver its first interest rate cut in its June meeting.

The ASX 200 index also jumped because of the performance of key commodities. Gold jumped to a record high of $2,140 this week. This performance will benefit some top ASX companies like St Barbara, Predictive Discovery, Resolute Mining, and Bellevue Gold. 

ASX 200 index forecastASX 200

ASX chart by TradingView

The S&P/ASX 200 index has been in a strong uptrend in the past few months and the gains continued after the GDP report.

As a result, the index has remained constantly above the 50-day and 25-day Arnaud Legoux Moving Averages (ALMA). 

However, a keener look shows that it has formed a rising wedge pattern, which I have shown in green. The wedge is nearing its confluence point. 

In price action analysis, this pattern is one of the most bearish signs. Therefore, there is a likelihood that it will have a bearish breakout in the coming weeks. If this happens, it could retest the important psychological point at $7,500.

The post ASX 200 index is slowly forming a dangerous wedge pattern appeared first on Invezz

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