After a strong sell-off on Monday, the ASX 200 index broke below some of its key support obstacles. The price fell below the medium-term upside support line, taken from the low of December 23rd, and also below the support area between the 6607 and 6626 levels. That said, the Australian index found good support near the 6437 hurdle, from which it reversed and is now trying to recover some of its losses. The price is currently trying to move further north, but as long as it stays below the aforementioned upside line, or below the above-discussed 6607 and 6626 levels, we will remain bearish, at least in the short-run.
A strong hold-up at the above-discussed resistance zone, between the 6607 and 6626 levels, could make the buyers worry about their capabilities of driving the index higher. We could see the sellers stepping in again and driving the index lower, targeting again the 6525 obstacle, a break of which may force ASX 200 to re-test the current low of this week, at 6437. The price may stall there initially, but if the bears remain in the driver’s seat, a drop below that low could open the way to the 200-day EMA, or to the 6300 level, marked near the lowest point of June.
The RSI is currently below 50, but points a bit to the upside, which is in-line with the above discussed idea of seeing a small correction before another leg of selling. The current situation on the MACD, overall, supports the downside idea, as the indicators has now shifted below zero, while running below its trigger line.
Alternatively, in case we see a push above the previously-discussed resistance area between 6607 and 6626, and also a price-rise above the upside line, we will abandon the bearish scenario, at least for a while. Such a move could invite more buyers into the game, who could lead the index to the 6776 obstacle, a break of which might open the door for a move towards the all-time level, at 6877, reached on July 30th.
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