ASX 200: Bullish Trend Strengthens as Bearish Pattern Fades | Episode 282

By Jason McIntosh | 24 January 2025
The ASX 200 has remained relatively stable this week, showing less than a 1% change from last Friday. However, beneath the surface, significant developments suggest the market’s bullish trend is gaining strength.
Let’s dive into the latest insights, explore technical signals, and outline strategies to navigate this evolving market environment.
Head and Shoulders Pattern: Bearish Setup Loses Momentum
One of the key bearish scenarios for the ASX 200 was the potential formation of a head and shoulders pattern, often a warning sign of market tops. However, recent price action has significantly reduced the likelihood of this bearish outcome.
Key Observations:
- Rally from January Lows: The strong rebound off the January 13 low signals robust buying interest, which contradicts the weakening price action typically seen in the right shoulder of a head and shoulders pattern.
- Approaching December Highs: The ASX 200 is now nearing its December high, further reducing the chances of a breakdown.
- Trend Bias: Without a clear breakdown, the default remains to side with the prevailing 12-month uptrend.
A Resilient Uptrend
The ASX 200’s upward trend remains intact, supported by key technical factors and consistent buying on dips.
Key Observations:
- Rising Moving Averages: Both the 50-day and 100-day moving averages are trending higher, and the ASX 200 has generally stayed above these levels.
- Consolidation is Normal: Pullbacks and consolidations, like the recent six-week pause, are common during bull markets and do not necessarily indicate a trend reversal.
- Wide Trailing Stops: Using wide trailing stops helps investors stay on board during temporary consolidations, enabling them to capitalize on long-term trends.
Equal-Weighted Index: Bearish Vulnerability Eases
The equal-weighted ASX 200 index has shown marked improvement, moving from a vulnerable position below declining moving averages to trading back above them.
Key Observations:
- Rally Off Lows: The strong rebound over the past few weeks has reduced the risk of a bearish breakdown and placed the index within striking distance of its all-time high.
- Consolidation Ahead: While immediate upward momentum is possible, some “backing and filling” (consolidation) above the moving averages may occur before further gains.
Strategies for Navigating the Current Market
- Stay Aligned with the Trend: The ASX 200’s trend remains upward. Continue to focus on stocks in uptrends while monitoring key support levels.
- Use Wide Trailing Stops: Protect gains by using wide trailing stops to ride the trend while minimising downside risk during pullbacks.
- Reinvest Cautiously: With the window of vulnerability now closed, consider redeploying sidelined cash into the market, but maintain flexibility for future adjustments.
- Avoid Overreacting to Noise: Selling at every hint of trouble can lead to missing out on the big trends that generate the most significant returns.
Key Takeaways for Investors
- Bullish Momentum Strengthens: The ASX 200’s strong rally off recent lows and its resilience near key moving averages suggest the path of least resistance remains upward.
- Reduced Bearish Risk: The fading head and shoulders pattern and the recovery in the equal-weighted index signal a diminished risk of near-term breakdowns.
- Balanced Approach: Staying disciplined with wide trailing stops and selectively reinvesting in uptrending stocks can help investors capitalize on the current market environment.
Final Thoughts
The ASX 200 continues to show strength, with the prevailing trend favoring higher levels in the weeks ahead. While consolidation remains a possibility, the reduced risk of a bearish reversal makes this an opportune time to focus on stocks in uptrends.
At Motion Trader, we emphasise systematic, rules-based strategies to help investors navigate all market conditions. Whether markets are consolidating or trending higher, our approach focuses on minimising risk and maximizing opportunities.
👉 For a deeper dive into technical analysis, check out our Weekly Strategy Sessions.
Motion Trader‘s algorithms scan more than 2,000 ASX stocks daily in search of medium term investment trends. We then tell our members precisely when to buy shares. And most importantly, we tell them when to sell.
Try a no obligation FREE 14-day trial of Motion Trader, and see what an algorithmic trading approach could do for you.
Take a Free 2 week Motion Trader trial
Video Timestamps
00:00 Intro
00:40 ASX 200: Did this classic bearish set-up just fail?
03:20 This remains the most important focus right now
04:13 Successful investors do THIS better than most
05:30 Look what the ASX Equal Weight Index just did!
07:40 SP500 catches out many traders (what you can learn)
10:00 Can you see this textbook pattern repeating?
10:40 This is how the BIG money is made
11:30 Two key risks (and what just changed)

Jason McIntosh | Founder, Motion Trader
Jason’s professional trading career began over 3 decades ago. He’s a founder of two stock advisory firms, a listed funds management business, and has helped thousands of investors navigate the stock market. Click here to read Jason’s incredible story of, at age 20, sitting alongside some of the world’s greatest traders (and the life changing experience that came with that).