The XAO has had a bull run for the last 2 weeks and people have been calling the bottom. I’m not as quick to do so. There’s  still no solid signs of buyers being in full control again. This is more likely to be a dead cat bounce. Why do I say that? Read on and see the evidence the charts give.

The XAO is still in a down trend channel that has been running since March last year. Within the channel there is a possible down trend line going back to October 2008, which if we have a consolidation or a rebound this week it will be confirmed with a 3 x touch.

Last week the XAO ended right under a resistance “zone”, which is outlined in purple. This zone has been evident for the last 3 or 4 months and intersects with the October down trend line inside the channel.

These 2 lines crossing are providing a significant resistance which is likely to force the XAO down this week. If this happens, the XAO has failed to make a higher peak and there are no higher troughs. Higher peaks and troughs are the first strong indication buyers have taken control. If the XAO manages to break through this resistance area, which is the lower probability scenario, it will be on it’s way to making a higher peak and we could then start considering the buyers are in control.

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