Technical indicators, and technical style traders, are important to any market because they bring a different perspective and can offer liquidity at levels and in times when more fundamental traders are on the sidelines.
Technical analysis is also an important part of any traders toolkit because even simple analysis — like trend lines — and simple formations — like Pennants — and trend channels tell these types of traders where the market support and resistance may be concentrated.
So, it was no surprise that traders jumped all over the break lower on the ASX on Friday after the key technical level they were watching gave way.
That saw the market close at 5,877 on the physical market, that’s a fall of 1.17%. Friday night’s trade was no better with June futures losing another 47 points.
The question traders will be grappling with today is whether the sell-off has further to go or whether, with the massive 1 trillion Yuan stimulus, the ASX should rally, with the expected lift in Shanghai stocks today.
In many ways the outlook is not its own to determine as global moves will either buffer or support the ASX. Technicians will be looking for a retest to the base of the pennant formation that the ASX 200 has just broken out of.
That means an eventual target on the ASX of 5,742.