World Markets This Week: ‘Tis the Season of Breakouts

16 July 2017

Markets in the U.S. and India staged a positive breakout this week. European markets are still range bound but the new uptrend in U.S. markets may trigger a more enthusiastic response in these markets in next week.

Let’s take a look at major indexes form these markets, Dow Jones, DAX and Nifty, to see how these major indexes from different markets have behaved till now, what are their major resistance and support zone and what can be expected from these indexes in coming sessions.

We have taken daily, 4-hours and hourly charts of these indexes, to show how markets behave near/ within major support and resistance zones and how you can utilize those for your trading.

To draw these zones, you can use 4-hour chart, which falls between long term (daily) and short term (hours/other smaller) time frames.

This video provides excellent example of how to draw these “zones” on 4-hour charts.

First, Dow Jones, which finally broke out of its month-long and very erratic range,  made a new record high and closed above 21,600. This is how its daily chart looks with lower support and upper resistance zone.

Dow Jones: Daily Chart. See how price reversed from resistance zone and bounced back from support zone.

Remember, now the previous resistance zone will act as a new support zone for the index. The same chart on 4-hours scale provides a more detailed trading pattern:

Dow Jones: 4-Hour Chart.

And here is the same trading range in hourly chart using Heikin Ashi candlesticks. This chart clearly shows how erratic this range has been. Look at RSI, showing a very choppy pattern instead of a clear overbought and oversold positions.

Dow Jones: Hourly Chart

DAX (Germany) shows an interesting range bound pattern, where a middle range separates price from upper and lower zones of a broader range and the prices has been moving above and below this middle band, traveling between higher resistance and support zones:

DAX : Daily Chart. There is a range within the range where middle level has been acting like support and resistance to price movement.

This is the same range in 4-hour, line chart, showing clearly the middle support and resistance levels. It remains to be seen if DAX will break out of this range after record closing in U.S. markets.

DAX: 4-Hour chart.

Nifty (India) has been making a classic range bound pattern and then staged a strong, clearly defined breakout. Here is its daily chart in Heikin Ashi candlesticks, clearly showing the support and resistance zones and how prices bounced back and revered from within those zones.

Nifty: Daily Chart

Here is 4-hour, normal candlestick chart of Nifty, showing more details of price movement:

Nifty: 4-Hour Chart

And here is the hourly, line chart of this index, showing minor support and resistance levels in the middle and broader zones of support and resistance zones at lower and upper part of its trading range. Also notice, how the previous resistance zone (left side) acts as current support for the index.

Nifty- Hourly Chart

Asia will  have its first session on Monday after the record closing in Dow Jones and S&P 500 last Friday. It will be very interesting to see how Asian markets and later in the session, European markets behave after this new record in Wall Street.  SGX Nifty had gained some 50 points during that session in in U.S. markets so it can be assumed that India markets will also open with gains and if that happens, Bank Nifty could open above 24,000.

Quite an interesting session awaits us. Just a few hours more and we’ll see how global markets open for a new week. Will it be a jump start for global stocks? Will U.S. stock futures continue with their new uptrend? Or will we see these numbers turn red, reversing the trend? Will India markets see a record opening for them too? Or, some negative news/ event will dampen the market spirit?

So many possibilities, so many questions. Answers still a few hours away. So keep your fingers crossed and enjoy the remaining weekend.

Good luck, see you in trading rings soon!

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