NCM Fan Formation & Base Protection

With the recent fall in gold not helping its cause, NCM remains pinned to its downtrend. We currently see a downward fan formation, and a positive protection of the key low (thus far) reached at 20.89 in July last year. The weekly chart shows a possible setup for MACD to run into positive territory, with bullish divergence seemingly around the corner just beneath the level of zero. If this eventuates, we may see NCM move back towards 24.40 to the resistance levels of the current channel it finds itself within.

Trading ranges are becoming more compressed as we move towards the apex of the triangle, and this leaves the door open for a breakout to either side. Resistance may be provided by the 10WMA, but conversely, there is support of 20.89 and uptrending support dating from July 2012 to keep price levels buoyant. A breakout past the first downward trending level of resitance may give NCM impetus to arrest its decline and see breakouts to subsequent levels of overhanging resistance given the fan formation setup.

The fan formation is again highlighted in the daily chart. Bulls will want price action to stay within the current up channel and move towards a test of the 78.6% retracement levels of 22.83. This would bring the next level of resistance from the fan into play. Stochastics are also reversing away from extremely oversold regions, and bullish momentum here may help fuel a short term rally. Another possible pattern that may be in play currently is the reverse head & shoulders with a neckline of 22.83. Again, this would seem to support a breakout to the upside, at least to the 61.8% levels of 24.36. However, we must also watch the 20DMA which is currently testing the 50DMA. A 'death cross' here may keep a lid on prices.

 
If we look towards the middle of 2013, we can see a clear descending triangle. This further highlights the base of 20.89 will be the key number to watch between now June - a decisive move either way should be known before then.

The hourly chart shows a break out from the resistance of the wedge, now clearing the path for a rally. As long as the channel's support holds on Monday, this would seem to suggest a move back towards 23.00-23.20. Stochastics would seem to support this with an inflection point reached before the close on Friday. But the MACD may also be showing a reversal towards zero, and bears may be given strength to breakdown the rally quickly if negative territory is reached.

XJO Slips To Begin March

The XJO finished February strongly to cap another winning month, its third in a row. Despite Friday's loss, the index has now returned 9.40% YTD. The monthly chart shows a possible symmetrical triangle pattern, where the XJO looks to be testing resistance with a possible breakout target of the 61.8% retracement level of 5,408. However, when extrapolating out the trendlines, the apex of the triangle is still one year away. Price action could easily still be constrained within the confines of the triangle for some months to come.

The weekly chart shows a healthy break of the 50% retracement level so far, with 4,962 providing support to the current uptrend. MACD levels remain fairly elevated and if a correction ensues, we could quickly see a break below 4,962 again. Bulls will want to distance current price action further away from 4,962 - a move towards 5,200 would provide more short-term comfort given the historical resitance that 4,962 has provided since 2009.

The daily chart shows price levels testing the overhanging downward trending resistance line from the all-time highs. A small wedge is up ahead for next week meaning a possible decisive move, and we see two possible scenarios playing out: (1) the long-term resistance gives way and prices elevate towards 5,175; or (2) long-term resistance wins out and the current uptrending channel originating from November 2012 breaks down. We would lean towards scenario #1 as the 20DMA will provided added support for the uptrend. Stochastics have seemed to reverse off of the 50% level sharply, and the parabolic rise back towards overbought levels may spark higher moves. MACD remains steady despite the negative divergence from the signal line, which may be erased soon.

The hourly chart shows a break to the upside from the descending which formed last week. However, price action has failed to reclaim levels within the uptrending channel. 5,075 provides support for now, and any moves higher may continue to be suppressed by the channel's support line. Bears will want to see 5,075 lost early next week to set up a move back to 5,000.

Normal Service Resumes

After the shockwave of last week's big dump on Thursday, the bulls have answered with two winning days on the XJO, putting the index back above 5,050.

A spinning top was printed last week on the weekly chart, indicating indecision. 4,962 is the support level to watch in the short-term, as well as the recent cross in the 50WMA & 100WMA, which may help to provide support.

The daily chart shows 4,969 acted as resistance-turned-support, and in tandem with the support of 20DMA, the XJO was able to push back past 5,000. Price action now sits in the middle of the uptrending channel which has been preserved amidst the increase in volatility over the past few trading days. Stochastics are seeing a move towards more neutral levels, and MACD momentum is slightly with the bears at present. On a DeMark indicator basis, last Thursday would have been the point for a bearish price flip and today would see the TD buy setup extend to 3. Overall, there cannot be a comprehensive case made for a clear move in either direction.

 

The hourly chart shows a violation of the uptrend dating back to early January. Price action is struggling to reclaim the higher ground above trending support - the next few days may provide a better indicator of whether the support line will turn into resistance.

Bears Strike Back; XJO Back Under 5,000

Double digit YTD returns only in February? Not so fast. With one swift move, the XJO is back under the magic 5,000 level. A loss of this magnitude has not been since May last year, and many financial commentators are chalking it up as a "healthy correction" that "we had to have". Whilst this premise may be proven until guilty, the next few days should make it clearer see whether a broader trend reversal has arrived.

The first key level we have to watch is the 4,969 mark which was swept aside earlier this month. We predicted that there would be bears waiting in earnest for a fight to protect 5,000, however we were proven wrong with the strong positive momentum over the past couple of weeks. The revisit below 5,000 gives another chance to bears to reload and place negative pressure to drive a more sustained correction. The MACD has already reversed into negative divergence territory alone on today's move, and the stochastics are also showing a move backing away from extreme overbought territory.

Bears will want to target 4,969 and the rapidly rising 20DMA, which also happen to converge with the upward trending support. If this level breaks down rapidly, we may see a bigger correction in store, perhaps back towards 4,850 and the 50DMA.

WBC Poised For Test Of All Time Highs

WBC has been the greatest beneficiary of the current rally, ahead of all the other major banks in terms of return over the past 12 months.

The wave of euphoria surrounding dividend stocks has seen WBC breakout through the resistance of 28.43, the mark achieved in April 2010 before the "Eurogeddon" woes came into the spotlight. The positive momentum on the XJO has carried its price to a 30-handle, with current price action suggesting a test of its all time highs of 31.31 made back in November 2007.

The hourly picture seems to also support this view, with a breakout of resistance from late January achieved earlier this week.

As far as Ichimoku Clouds and TD Indicators are concerned, there is nothing to suggest a trend breakdown at the moment, with the latest surge in WBC's price taking it away from the cloud as well as the KijunSen & TenkanSen lines. In our view, despite breakdown in the active TD Sell Setup today on number 5 - a minor hiccup but still one to watch - there is still seems to be both bullish momentum on the MACD and readings on the Ichimoku indicators to carry it towards the 31.31 mark.

If this rise eventuates, it may serve as further fuel for the current rally on the XJO to reach 5,177 - the mark which we discussed in our earlier post today.

Can't Change The Headline

The XJO finished on the doorstep of 5,100, capping another positive day despite a lacklustre BHP result and some negative pressure surrounding the major miners. The index has now gained 9.67% in 2012.

On the hourly chart, price action finished the day above the uptrending channel. However, bears brave enough to stand in the way of the market can maybe draw some solace from the MACD & stochastic indicators, which suggest a run into some short-term downward pressure.

The daily chart tells a similar picture, with a second consecutive close above the resistance line originating from November 2012. MACD is actually gaining positive momentum, even though stochastics are screaming to extremely overbought levels. Though one must note the stochastics have been in this region since December, and have been overwhelmed by this huge wave of positive momentum carrying the market. Bulls will now look to 5,177, the mark reached in September 2008, as their next level of resistance.

Another Day, Another Ramp Up

The XJO continues to power on, notching up its fourth gain in five days. The hourly chart shows the price action still lingering around the resistance of the channel after briefly piercing through.

On the daily chart with today's close, the price action is threatening to move out of the uptrending channel. There is still solid MACD momentum for bulls for the time being. The stochastics may be telling a different story, with levels appearing highly overbought and a sell signal from a crossover perhaps imminent. However, bears will give less weighting to this signal as it has not provided any return since October last year, as the XJO has been in a strong trend.