Top 40 Perspectives - 18 October 2015

Last week we believed that there was a potential for short-term pullback as the market consolidated following its recent break of resistance. This has pretty much been the flavour of the past week. The weekly chart shows the fairly small candle painting over the past 5 day period with the stochastic now in the overbought territory - although still pointing bullishly upwards.

The daily chart now clearly shows the stochastic moving downwards as it attempts to work off its overbought condition. The candlesticks make very interesting reading as a number of consecutive inside or near-inside days - again reflecting the anticipated consolidation has compressed price into a very narrow range. From a pattern perspective, we can see the making of a potential pennant formation which generally should see a break upwards in the direction of the trend entering the structure. 

The support and resistance doesn't add much in the way of insight as we have price settling above support as anticipated to a certain extent.

So some mixed signals in the making with a bias being in the court of continued short-term consolidation to work off overbought conditions culminating in a bullish breakout towards new all time high levels. On balance we will continue with the approach of exercising caution on short-term positions in our daily trading - with quicker fixed target profit while letting our long positions run as far as possible. If price starts to move below the 47,000 level though this would change the equation.