With yesterday's big slump in the XAO, it's chart has taken on extra importance - as a guide where price is going from here. If you look at earlier charts on this thread you will see I drew a very narrow price channel but while that was a good fit generally, 2 weeks broke well below the lower boundary (which suggests the channel could be wrong). I considered the 2 week fall was possibly an anomoly, but now feel that was wrong and the channel should have had a lower boundary as drawn this week. If that new channel is correct it suggests prices should recover next week (at least initially anyway).

I still subscribe to prices going higher before the next correction, however, the top of historical price action is something of a narrow band (shaded in pink) rather than a thin line. I'd be expecting price to roll over into a correction anywhere between 7300 and 7600. Interestingly (for chartists but probably few others), Time Theory suggests 23 March (or a few days either side) could be a time when price changes trend. Coincidentally, 7350 sees the time line, lower boundary of the pink overhead resistance and the upper boundary of the green price channel all coincide. As the famous trader and chartist, Bill Gann, held - it is very meaningful when time, price and pattern converge.

Remembering that charting is far from an exact science, I'm expecting price to recover from its current levels next week and move back up towards 7300. While ASX futures are green as I write this, the US lost ground again Friday night our time and that suggests a spike up on opening but perhaps little conviction for the rest of the trading day. If the US has a green day Monday then that should see the ASX follow suit on Tuesday.

Expect a lot of volatility going forward (as if we haven't seen enough recently!) but it does seem a market reversal could be close and we all need to watch our stop losses and be conservative with our new trades. Breaks below weekly trend lines and setting stops based on percentage falls below higher weekly troughs should be closely monitored. 

A few weeks ahead where perhaps XAO 26Feb21asbestos underwear could be in need! 


2 February 2021

In my blog last weekend I suggested the recent dip in the XAO could have a bottom of 6750 to 6800 and yesterday's low of 6770 was in the middle of that range. Given the explosive recovery from yesterday's opening fall and an overnight rally on the US market, higher prices today seem likely. The XAO has been trading in small channel inside a larger channel (shaded). The upper boundaries of both channels converge around 7550/7600 and should prices run up from yesterday's close to break and close solidly above 7120 then that pattern gives a target of 7460 - which is in that same general area. While there is always the potential for price to fall back materially due to unforeseen events, the patterns are starting to line up for a new market top - possibly around the start of April (although time prediction in charting is about as reliable as time travel!). 

XAO 2Feb2021

15 January 2021

The XAO really hasn’t moved much for 6 weeks and last week was down 0.5%. I had hoped the strong rise the week before would have continued, to see a break above 7,020 - which is proving a very strong level of resistance. Perhaps the change of US administration and Biden suggesting new stimulus packages might push the US market up.

11 December 2020

The XAO made a reversal candle for the week and has paused near my previous target of 6,797. However, it has made a higher weekly trough followed by a higher high and price has moved up so there is a higher probability of price continuing its subdued climb to the top of the shaded price channel.

XAO 11Dec2020

20 November 2020

The XAO has been trading in gently rising price channel since June. The break up out of that channel suggests a short term target of 6,800 and potentially 7200. It seems a higher market into the end of the year is a likely outcome. Despite this optimism the elephant in the room remains the economic impact of what appears to be out of control and mutated Covid infections in Europe and elsewhere. Hoever the market thinks several months ahead and will have factored in a vaccine being rolled (or at least started to be rolled out)  by then. The same charting techniques applicable to an individual share are equally applicable to the XAO. Price is in an uptrend, above a weekly uptrend line and making higher troughs and peaks on the weekly chart - all of which are buy signals. Only if price falls back below that black uptrendline for 2 weeks would I say it is time to circle the wagons. But remember - never become complacement where the stock market is concerned.

XAO 20Nov2020


Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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