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Dow Jones Industrial Average Trades Down 3 of Last 4 Days

Dow Jones Industrial Average Trades Down 3 of Last 4 Days

2016-05-04 13:08:00
Jeremy Wagner, CEWA-M, Head of Education
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Talking Points

-Dow Jones has been trading lower 3 of the past 4 trading days

-Technical patterns suggest continued weakness

-DJIA may find support near 17,550 and possibly 17,000

Dow Jones Industrial Average (DJIA) has been trading lower for 3 out of the past 4 trading days. Based on the structure of the patterns, it appears further losses may continue over the next couple of days.

The price action in the US30, a CFD which tracks the DJIA, from February 11 to April 20 is an Elliott Wave 5 wave move. This suggests a correction is looming, though it is difficult to weigh the odds on the depth of a dip now.

Therefore, we’ll need to rely on the structure of a selloff, if one takes place, to provide us clues to its potential depth.

Dow Jones Industrial Average Trades Down 3 of Last 4 Days

We’ve identified 3 levels to keep an eye on and why each one may create a reactionary bounce.

Support Zone 1 from 17,524-17,575

There are 3 different types of analysis supporting this zone.

  1. Previous wave 4 near 17,524 (this is a common attraction point in a correction)
  2. 23.6% retracement near 17,532 (this is considered the be a minimal retracement level)
  3. Top of a 12 month trend line near 17,575 (blue line on the chart above)

Support Zone 2 from 16,900-17,144

There are three different types of analysis with support in the above zone.

  1. 200 simple moving average appears near 17,093
  2. 38.2% Fibonacci retracement near 17,144
  3. Weekly Ichimoku cloud top near 16,900

The support zones become less significant at lower levels with a key level down near 16,050. If a bounce higher ensues from above this key level line, then the door is open for stronger bullish medium term outlook. If DJIA breaks below this line, there is still bullish technical patterns available, but bearish patterns weigh in creating a mixed medium term outlook.

The above is a shorter term forecast for Dow Jones. If you are interested in our Q2 2016 equities forecast, download it here.

Suggested Reading/Viewing:

The S&P 500 Abides by Support (for now)

Gold Price Surges to Largest Weekly Gain in 11 Weeks

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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