ASX 200 index continues to drift south, while trading below a steep short-term downside resistance line taken from the high of October 26th. Given the current risk-off environment in the market, there is a good chance to see the index continuing to move lower, especially if it stays below that steep downside line. For now, we will take a bearish approach.
A drop below the current low of today, at 5937, would confirm a forthcoming lower low, potentially opening the door for a further slide. We will then examine a possible drop to the 5911 hurdle, or the 5875 zone, marked by the low of October 6th and the high of October 2nd respectively. If the price gets held near the latter one, ASX 200 might rebound somewhat. However, if the price remains below the aforementioned downside line, another move lower could be possible. If so, the index may slide to the 5875 obstacle again, a break of which might open the way to the 5826 level, marked by an intraday swing high of October 2nd.
Looking at the RSI and the MACD on our 4-hour chart, we can see that both are showing negative price momentum, as the MACD is below zero and its trigger line, and the RSI is below 50. However, given that the two oscillators are currently on the flat side, we would prefer to wait for a break of the 5937 hurdle first, to get a bit more excited with further declines.
Alternatively, if the previously-mentioned downside line breaks and the price climbs above the 5993 barrier, marked by the current high of today, that may attract a few extra buyers into the game, possibly clearing the path for larger advances. ASX 200 could then travel to the 6023 obstacle, a break of which might send the price to the 6075 zone, marked by yesterday’s high. If the buying doesn’t stop there, the next potential target could be at 6101, which is the low of October 22nd.
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