ASX 200 Drops Slightly on Wednesday

• ASX 200 gives back some ground early on Wednesday.
• China/US situation continues to lead most risk appetite markets, including Australian equities.
• Under the hood, ASX 200 is a bit noisy.

During Wednesday’s trading session, the ASX 200 slipped slightly. The index continues to test resistance near the AU$8,350 level, a zone that has proven significant on multiple occasions. Meanwhile, strong support remains around the AU$8,200 level, suggesting the market may be entering a “wait and see” phase ahead of the Reserve Bank of Australia’s upcoming interest rate decision next Tuesday. That said, it’s equally plausible that traders are pausing to digest the strong gains accumulated over the past several weeks.

Macquarie Group Ltd (MQG)

Macquarie Group fell 1.60% on Wednesday, closing at AU$211.85. The decline saw the stock test the crucial 200-day EMA, a key technical indicator closely watched by traders. Overhead, the AU$220 level remains a notable resistance zone, having acted as a pivotal level for several months. While MQG appears somewhat extended in the short term, some buying interest may have emerged ahead of the upcoming AU$3.90 dividend payment scheduled for Monday.

RIO Tinto Ltd (RIO)

RIO Tinto rose 0.53% on Wednesday, recovering from what initially appeared to be a negative session. The stock gapped higher at the open but quickly reversed, breaking below the previous session’s low before finding support. Notably, the 200-day EMA sits just underneath current levels, providing technical traders with a potential support zone.

Optimism around US-China trade talks continues to lift sentiment in the materials sector, which remains highly sensitive to macroeconomic developments. Additionally, Rio Tinto announced a 3% year-over-year increase in expected copper production, a supportive factor for its long-term outlook. Over the past month, RIO has climbed 10.25%, though it remains down just under 6% over the past 12 months.

Woolworths Group Ltd (WOW)

Woolworths Group dipped slightly by 0.16% on Wednesday, but more importantly, appears to be finding support at the 200-day EMA. The stock has experienced a sharp pullback recently, shedding roughly AU$3 over just three sessions following what had been an overheated rally. The decline may be drawing in value-oriented investors who see potential at these levels.

While recent price action has raised questions about the broader trend, Wednesday’s neutral candlestick formation sitting right atop the 200-day EMA suggests that support could be firming. Given the volatility seen over the past few months, this type of sharp correction isn’t entirely unexpected, but it’s one that market participants will be watching closely.

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