ASX 200 Morning Market Outlook: Fortescue Breakout, Materials Rally

The ASX 200 looks set for another firm open on Wednesday after materials and financials extended their gains. Fortescue’s bullish breakout and strength across key sectors have underpinned sentiment, following dovish comments from Fed Chair Jerome Powell and upbeat earnings from Goldman Sachs amid US earnings season.

View related analysis:

Fortescue Breakout Lifts ASX 200 Outlook

ASX 200 Market Snapshot

ASX bulls put on a convincing show with their 1% gain being the best in nine days
11 of the 10 sectors advanced, led by healthcare and materials, 129 stocks (64.5%) advanced, 52 declined (26%) and 19 flat (9.5%)
The average daily range of the ASX 200 over the past years has been 78.6 points, or 66.3 points over the past three months
Wall Street indices were cautiously higher overnight and the ASX 200 futures market (SPI 200) was effectively flat, suggesting the broader index could be in for some choppy trade todayWall Street indices were cautiously higher overnight and the ASX 200 futures market (SPI 200) was effectively flat, suggesting the broader index could be in for some choppy trade today

Chart analysis by Matt Simpson - data source: ASX, LSEG

ASX 200 Materials Surges While Financials Regain Momentum

The ASX 200 Materials sector (XMJ) reached another record high on Tuesday, extending its rally from the March low to 41.4%. The sector is on track for a fourth consecutive bullish week and has gained 13.7% over this period. BHP Group advanced 1.75% to a one-year high, Fortescue (FMG) broke above $19.56 resistance to a 13-month high, while Rio Tinto and Northern Star Resources both set fresh records.

The Financials sector (XFJ) also turned higher in line with Monday’s bias, supported by dovish comments from Federal Reserve Chair Jerome Powell and upbeat earnings from Goldman Sachs (GS). All four major banks finished higher, although it remains to be seen whether momentum will be strong enough to drive new highs.

Chart analysis by Matt Simpson - Source: ASX, LSEG

Fortescue Ltd (FMG) Technical Analysis

Monday’s gap lower proved to be a false move, with FMG instead finding support at the 50-day SMA. This marked a key swing low and the latest higher low within an ascending triangle, which projects an upside target of around $21 if successful.

The rally over the past three sessions has also been accompanied by above-average volume. Tuesday’s breakout session opened near the day’s low and closed at its high, placing prices at their most bullish level since late September.

Interim resistance levels for bulls to watch are $20, followed by the July and September 2024 highs at $20.35 and $21 — near the triangle target.

Chart analysis by Matt Simpson - Source: TradingView, Fortescue Ltd (FMG)

ASX 200 Futures (SPI 200) Technical Analysis

The daily chart shows that ASX 200 futures have formed a bearish divergence on the RSI(2). Prices were effectively flat overnight, suggesting that bullish momentum from the prior session has stalled. With several resistance levels nearby and cautious gains on Wall Street overnight, upside potential for the ASX may be limited today.

On the 1-hour chart, price action has turned choppy, although a long bullish pinbar highlights demand around 8,970 ahead of a rebound back above 9,000. Prices are also stabilising above the weekly pivot point.

If bulls can gain early traction, bears may look to fade into resistance around the 9,045 swing high, the weekly R1 pivot (9,059), or the August high (9,065) for a potential near-term countertrend setup. Downside targets include 9,000, the 8,970 low, and the 8,939–8,950 support zone.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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