ASX 200 Technical Analysis: Consolidation or Market Top? | Episode 263

By Jason McIntosh | 15 November 2024

The Australian Securities Exchange (ASX) 200 index has been relatively stable over the past week, prompting investors to question whether we’re witnessing a market rollover or merely a pause before further gains. Let’s dive into a detailed technical analysis of the ASX 200 and its key components to understand the current market dynamics.

Competing Forces Within the ASX 200

The ASX 200 is currently experiencing a tug-of-war between two major sectors: financials and materials. This internal struggle is creating an interesting market scenario that’s worth exploring.

Financials: Leading the Charge

The financial sector, tracked by an ETF representing the ASX 200 financials, has reached an all-time high. This sector has been a driving force behind the local market’s performance

1. Commonwealth Bank of Australia (CBA): A Standout Performer CBA, a leading stock within the financial sector, has also achieved an all-time high. After a period of consolidation, CBA broke out in January and has been in a strong uptrend since then.

Technical Analysis Insight: Range Breakouts
When a stock breaks out of a large trading range, it often leads to a significant move. CBA’s breakout from its consolidation phase is a prime example of this technical pattern in action.

Materials: The Counterbalance

In contrast to the financial sector, materials have been range-bound for nearly three years. This sector has been oscillating around its moving averages, creating a competing force within the ASX 200.

Technical Analysis Tip: Moving Averages
Moving averages are crucial indicators in technical analysis, helping traders identify trends and potential support/resistance levels. Learn more about moving averages in technical analysis.

ASX 200: Consolidation in Progress?

Given the conflicting movements in financials and materials, the ASX 200 has maintained relatively stable levels. This stability suggests a potential consolidation phase.

Potential Scenario:

Several weeks of sideways consolidation which could include a retest of the 50 and 100-day moving averages. It’s also possible we see a zigzag retracement back to (and potentially below) the October low.

Theses are common chart patterns that form during consolidations. Following a consolidation, I believe the odds continue to favour a resumption of the underlying upward trend.

Technical Analysis Concept: Consolidation
Consolidation refers to a period where an asset trades within a defined range, often occurring after a significant price move. It can be a sign of indecision between buyers and sellers.

Equal Weight Index: A Bullish Perspective

The equal-weight version of the ASX 200 provides an alternative view of the market. This index shows a constructive price action, with the market finding support around the 50-day moving average after a strong rally.

The equal-weight index has pulled back to the top of its previous trading range after a breakout. This “retest” of the breakout level is a common occurrence in technical analysis and can often lead to further upside if support holds.

Conclusion: Cautious Optimism

While the ASX 200 faces competing internal forces, the overall technical picture suggests a period of consolidation rather than a market top. Investors should watch for potential buying opportunities on dips, while maintaining appropriate risk management strategies. For more in-depth analysis of Australian stocks and global markets, consider exploring our weekly Strategy sessions. 

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Video Timestamps

00:00 Intro

00:30 ASX 200 investors need to ask this 1 question

01:25 Don’t miss this key lesson (it could make you a lot of money)

04:40 Watch out for this weight on the ASX 200

06:30 ASX 200 could be about to follow this path (I’ve seen it many times)

11:20 Is the SP500 rally all hype? (This could tell us)

14:15 Here’s the bottom line for US stocks

15:00 Big money is made by doing THIS

Jason McIntosh | Founder, Motion Trader

Jason’s professional trading career began over 3 decades ago. He’s a founder of two stock advisory firms, a listed funds management business, and has helped thousands of investors navigate the stock market. Click here to read Jason’s incredible story of, at age 20, sitting alongside some of the world’s greatest traders (and the life changing experience that came with that).