Sunday, 19 March 2017
Here is something interesting to chew on over this weekend.
Are U.S. markets turning towards a correction?
Check this Dow Jones Chart which is showing a range bound pattern and yet, the index is starting to make classic signals of a trend reversal- in this case from high to low.
1) Fibonacci levels are showing the current broad range for Dow Jones between 21,172- 20,772. It first dropped to range support, then bounced back from 20 Day EMA (Exponential Moving Average).
2) After the bounce, it went back to 21,000 but this time, stopped before going to the range top and turned lower from this resistance. See how the index is making “lower high” by this behavior.
3) The index is still range bound, it has still various support levels within the range, but now check RSI– turning down from an overbought position, signaling the uptrend in losing strength.
4) The MACD signal is also showing a moving average crossover, another signal of increase in selling pressure.
This chart is a classic, beautiful example of trend reversal. Only the 20 Day EMA is standing like the last defense for Dow Jones and once this fence is breached, sellers will jump in the market.
Another interesting thing to notice is a minute range created in last two sessions; between 21,000 and 20,888. This also gives day traders an opportunity to go for swing trading between upper and lower levels of this smaller range. So on Monday, if Dow Jones reverses movement and starts climbing up, one can buy on this support till the resistance level. And, if the index continues to trade lower, then its short term downtrend (from 21,000 till 20,858 ) will remain effective.
Who says markets don’t tell you what to do and when? 🙂
Let us see how this chart develops on Monday.
Till then, good luck & enjoy the weekend.