Good morning team,
Overnight the US reported a large increase in its inflation rate YoY at 8.5%, beating the estimates of 8.4%. The spike in inflation is putting upside pressure on metals which is beneficial for the ASX due to the large quantity of miners and explorers here in Australia. The increase in inflation may also put upside pressure on banks who will be looking to increase interest rates over the next year.
We see the recent corrective decline on the ASX as a buying opportunity – at least over the short term.
ASX – Technical Analysis
We picked up a good win going long on the ASX over the past couple of weeks as the market set up a higher low after completing an ABC corrective decline. A similar scenario has possibly arrived on the shorter term time frame.
The recent decline is also in 3 sub waves labelled a-b-c, the c leg looks fairly small, however it is still valid in Elliott wave theory. Therefore we are looking to place a long position at the most recent swing high. If the market activates our buy stop it should continue to the upside. There is a chance of a deeper correction into the 7360 level so we will keep an eye out for a buy entry at a lower level.
Trade Setup: BUY STOP – Entry price 7506, stop loss 7430 and take profit 7636.
Stop loss: 76 pips
Take profit: 130 pips