Summary: Rally in ASX 200 is showing weakness; KOSPI may be preparing for a rally.
ASX 200 faces upside exhaustion
Australia’s ASX 200 rally is showing signs of exhaustion, with prices testing the confluence resistance of an ascending trendline and the April 2022 high of 7624, which is below the all-time high set in 2021 at 7633. There is a lack of momentum on the daily chart – the 14-day relative strength index (RSI) has been trending lower, while the index just made new highs earlier in the week – and the divergence in the RSI suggests that the index may struggle to break confluent resistance.
ASX 200 index daily chart
Source: TradingView
In terms of direction, the daily trend is upward. However, given overbought conditions, a consolidation/minor pullback cannot be ruled out. Also, the index has struggled to extend gains over the past few weeks or so, which could be a sign of exhaustion to the upside.
ASX200 index daily chart
Source: TradingView
Near-term support is at the December high of 7375. A break below would indicate that the short-term upside pressure has weakened and range-bound trading is likely. The index needs to stay above the 200-day moving average (currently around 7000) to maintain a broad uptrend. As previously highlighted, a double bottom (June 2022 and October 2022 lows) formed after breaking the August high of 7138 at the end of 2022, a pattern that suggests a possible rally to 7865.
KOSPI Technical Outlook: Neutral
The KOSPI has lagged other indexes in recent weeks, but appears ripe for a rebound.
KOSPI daily chart
Source: TradingView
The South Korean benchmark is attempting to rise above key resistance, which could affect its trajectory in the coming weeks. If a breakout of the slightly downward sloping trend line from August (around 2480) is confirmed, a head and shoulders pattern will form (left shoulder is mid-2022 low, head is September low, right shoulder is early January low) , which will pave the way towards 2870.
KOSPI daily chart
Source: TradingView
Prices rose above the 200-day moving average for the first time since late 2021, suggesting that multi-month downward pressure is fading. The index needs to hold above the immediate support of the mid-January low of 2355 to maintain the bullish view. Strong support is at 2181, the low in early January.
(by Manish Jaradi)
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