Technical Analysis: 19 March 2021

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Former Senior Technical Analyst
Date posted:
19 March 2021, 12:00 PM

Dow Jones Industrial Average

The Dow Jones Industrial Average has been trading in a strong secondary up trend since March 2020, fluctuating within the boundaries of an up trend channel.

The current short-term up swing has rebounded to its channel line crossing at 33,300 which is likely to act as a dynamic resistance for the index.

The daily RSI and stochastic indicators have reached overbought territory suggesting that the index is vulnerable to a pull back in the short-term.

The initial downside target is 31,600, however an extension to its dynamic support of 31,250 is possible and is a key level to monitor, as a break below it would suggest a deeper pull back to its medium-term up trend line crossing at 28,900 could unfold in the months ahead.

S&P/ASX 200

The S&P/ASX 200 index has been trading in a consistent up trend since March 2020 which is still technically intact.

A large bearish divergence between the price and the RSI indicator has formed over the past four months showing that momentum is deteriorating and suggesting that the up trend is likely to take a breather.

The long-term up trend line has been breached over the past week adding further evidence the up trend is deteriorating.

While the daily RSI indicator remains in its bull market range at this point and there is no sign of a trend reversal, the weekly RSI and MACD indicators are in overbought territory suggesting that a deeper pull back could be seen soon.

As long as key static and dynamic support of 6,517 holds, the expected correction could unfold in time rather than in price, however should this level get broken a decline to 6,200 is likely to be seen in the coming months.

Given the deterioration in the momentum conditions and the fact that important reversals often occur in the month of March, we see increased risk of support of 6,517 getting broken.

Crude Oil

Crude oil has been trading in a strong up trend since April 2020 which is still technically intact. The recent price action rebounded close to its key resistance of US$66.60 where strong selling pressure is likely to arise.

The weekly RSI indicator has turned lower from overbought territory suggesting that a secondary pull back could unfold in the coming month(s).

A bearish divergence between the price and the weekly stochastic has formed over the past month, which is a strong indication that a deeper correction is likely.

The daily RSI indicator broke below its support overnight suggesting that the secondary rally from the November 2020 low is likely to reverse course.

Given the deterioration in the weekly and daily momentum conditions and the proximity to key resistance we see the price of oil as highly vulnerable to a deep pull back in the short-term.

The potential downside price target is US$54.00, which is a dynamic support for the commodity and an important level to monitor.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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