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!).
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.
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.
