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Dow Jumps to Fresh Four-Month Highs After Fibonacci Support

Dow Jumps to Fresh Four-Month Highs After Fibonacci Support

2018-07-26 15:27:00
James Stanley, Strategist
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Talking Points:

- The Dow Jones Industrial Average has broken-out to a fresh four-month high after the earlier-week test of Fibonacci support.

- At this stage prices are elevated beyond any recent points of support, complicating the prospect of near-term positioning. This is combined with a heightened outlay of risk events next week that can constrain the prospect of bullish continuation strategies.

- DailyFX Forecasts are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Dow Jones Industrial Average Breaks Out to Fresh Four-Month Highs

The bullish Q3 continues in the Dow Jones Industrial Average, as the index has put in yet another bounce from Fibonacci support to run up to a fresh high. This time, prices found support at the 14.4% retracement of the April-June move, as we looked at on Tuesday; and after a hold of support into yesterday morning, prices jumped above that June swing to set a fresh four-month high in the Dow.

Dow Jones Hourly Price Chart: Bullish Breakout to Fresh Four-Month Highs After Fibonacci Support

Dow Jones Hourly Price Chart

Chart prepared by James Stanley

At this stage, the primary complication would be the prospect of chasing a bullish trend after pushing up to fresh highs – and this is combined with the fact that the next week brings a significant amount of risk with a series of Central Bank rate decisions. The Fed announces their July interest rate decision next Wednesday, and while there are few expectations for any actual moves, the details of the statement will likely be watched for clues of the Fed’s commitment to another two rate hikes in the remainder of this year.

The fear at this point would be overbought conditions in the index after another bullish breakout to fresh highs, as buyers have remained in charge for much of the fresh quarter.

Dow Jones Daily Price Chart: Bullish Breakout Leaves Price Far From Nearby Support

Dow Jones Daily Price Chart

Chart prepared by James Stanley

For traders that want to treat this move aggressively, the prospect of working with pullbacks and higher-lows remains, and there are three such areas near current price action that could be used for as such. The June swing-high came in around 25,370, which is the 14.4% Fibonacci retracement of the February sell-off. This level gave little to no resistance during yesterday’s topside breakout, and this could now be re-purposed for higher-low support. A bit-lower, we have the prior July swing-highs around 25,218, and this, too, could be used to look for higher-low support.

If we do get a deeper pullback, the area around the psychological level of 25,000 could be used as well, and if we don’t hold up there, traders would likely want to question the prospect of short-term bullish continuation in the index.

Dow Jones Four-Hour Price Chart: Higher-Low Support Potential for Bullish Continuation

Dow Jones Four-Hour Price Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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