Friday, August 27, 2010

DJIA Update- Charting for Success

Dow Jones Industrial Average Technical Analysis

Daily Chart-6 months

-Momentum still has plenty of room to fall as it just passed break-even territory
-Resistance appears to be forming at the 50-day SMA or 10,300 level
-We could see potential support slightly above 9900-9950
-If this level breaks, Dow could fall to 9300-9500 range, though next clear level of support on the daily chart is 9800
-Expect to see a retest of 50 on the RSI to confirm a downtrend if the re-test fails
-The most recent sell-off lacked aptly confirming volume
-Possibly a head and shoulders reversal pattern

Weekly Chart- 2 Years


-Support may come at levels of 9,600-9,700
-200 day SMA acts as near-term resistance, this equates to a price level of 11,000
-The last rally to 11,000+ was confirmed by robust volume
-Momentum still has room to move to the downside, though it looks to be flattening out
-The 50 day SMA is poised to cross the 200-day SMA, ‘The Golden Cross’, which indicates a strong bullish signal
-35-37 will need to be broken on the RSI for this down-trend to continue


The Daily and Weekly charts both tell equally convincing stories. The Daily chart indicates very bearish sentiment while the Weekly indicates a potential rally is on the way. Thus, in-lieu of the toss-up, I will look to volume over the next few trading days to indicate which way the tape might be headed. At this time, the Dow is up 151.90 points to 10,137.70. A short-covering rally may be underway, or the bulls may be winning the battle today. Regardless, many bears exist in the market, it is only a matter of time before market participants show their true costumes.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

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