Thursday, 26 April 2012

ASX 200 sells off most of the day to set up a bearish shooting star

The ASX 200 peaked at 4394 a few minutes after its morning open, before selling off most of the day to close at 4374. This has set up a bearish shooting star candlestick (circled below). As with all single candlestick set ups, it requires a confirming candle in the next period's trade, which in this case would be a move tomorrow below today's low.

The next chart includes after hours trade, which shows that the market made a brief foray above the resistance zone which I have been illustrating for weeks now, but is now trading back within that zone. False signals can often be more powerful than signals that follow through. In this case, pending the confirmation of a move below today's low, the false upside break could lead to a sharp decline. 

To further illustrate the false upside break followed by the all day sell off, I have included an hourly candlestick chart showing the action since the end of March. It shows frenzied traders bidding up the market to over 4400 in pre-market trade just before 10am, then selling off all day. Could the pre-market action have been a blow-off?

EUR/USD looks to have completed a short term wedge

If so, it should head lower toward another test of the neckline or support line.

NASDAQ 100 still trending down

Despite the excitement over Apple's earnings and the subsequent stock market rally, the NASDAQ 100 is still trending down. Admittedly by the skin of its teeth. The chart includes after hours trade.