Rising Unemployment Bearish For AU200
IFC Markets | Jan 19, 2018 08:10AM ET
Australia’s unemployment rose in December. Will the FTSE RAFI Australia 200 stock index continue declining?
Australia’s unemployment rate ticked up to 5.5% in December from 5.4% in the previous month when no change was expected. While the job growth was stronger than expected higher unemployment is bearish for Australia’s stock market index. On the positive note, China's economy grew faster than expected in the fourth quarter from a year earlier, and new home loans in Australia rose in November after the decline in October and new car sales rose in December, adding to upside risk for AU 200.
On the daily timeframe, AU200: D1 is correcting after hitting a ten-year high in the beginning of January. The price has fallen below the support line.
- The Donchian channel indicates no trend: it is flat.
- The Parabolic indicator has formed a sell signal.
- The MACD indicator is above the signal line and the gap is narrowing, which is a bearish signal.
- The stochastic oscillator is rising from the oversold zone.
We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 5988.19, confirmed also by the fractal low. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian bound at 6159.30. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (6159.30) without reaching the order (5988.19), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.
Technical Analysis Summary
Position - Buy
Sell stop - Below 6159.30
Stop loss - Above 5988.19
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