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Dow Jones Attempts to Build From Base of Chart Support

Dow Jones Attempts to Build From Base of Chart Support

2018-10-17 19:00:00
James Stanley, Strategist
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Dow Jones Talking Points:

- US Stocks have put in further signs of recovery after last week’s spill. The Dow found support at an interesting level, as discussed in this week’s Technical Forecast for Global Equities, and that support around 25k has helped to produce a sharp topside move that’s erased a portion of last week’s losses.

- As of yet we’re not entirely out of the woods. Buyers remain tepid despite yesterday’s topside rally, and a hawkish Fed combined with a series of headline risks have helped to temper enthusiasm today as sellers have held resistance in the Dow around the 38.2% retracement of the Q3 bullish move.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro 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 Works on Support Base

Last week produced a rather aggressive pullback across global equities, and this was very noticeable in the United States where earlier in the month we had pushed up to fresh all-time-highs. Making matters a bit less threatening was the fact that there didn’t appear to be a singular driver pushing sellers into the market, making it simple to qualify that retracement as a garden-variety pullback.

In the Dow, last week’s pullback brought a big level back into play at 25,000. This was a confluent level, and it had also helped to set support in mid-August just before the Q3 bullish breakout really started to run. This support settling-in helped to bring a bullish outlook on the Dow in this week’s Technical forecast, and that theme has continued to run after yesterday’s rather aggressive topside rip.

The big question now is whether bulls can continue the move, or whether sellers come back to make another push-lower to further eviscerate prior Q3 gains.

Dow Daily Price Chart: Bounce From Confluent Support Around 25k

Dow Jones Daily Price Chart DJIA DIA

Chart prepared by James Stanley

Dow Jones Shorter-Term: Recovery Underway

Taking a shorter-term look at the matter, a Fibonacci retracement can be applied around the Q3 bullish move to help put last week’s sell-off in scope. That down-side run marked a 61.8% retracement of the prior Q3 bullish trend, and after a bit of struggle, support eventually showed off of that retracement. After a bit of short-term resistance at the 50% marker, and the same at the 38.2% level, buyers came in to show higher-low support at 25,478, or the mid-point of last quarter’s major move, and this helps to keep topside strategies open as there’s signs of recovery from last week’s spill.

Dow Jones Four-Hour Price Chart: Support at 61.8, 50%, Resistance at 50, 38.2%

Dow Jones Four Hour Price Chart DJIA DIA

Chart prepared by James Stanley

Dow Jones: Re-Test of 25,900 to Re-Open Door for Bullish Trend Approaches

Taking an even shorter-term look at the matter, and traders would likely want a bit of additional confirmation before looking to implement trending strategies on the index. At this stage, the Dow has printed a fresh short-term higher-high at the 38.2% retracement along with a higher-low at the 50% marker (which also happened to be the Monday swing high).

This is encouraging for bullish approaches, but the fact that buyers have shied away from a re-test of the 38.2% retracement, at this point, takes a bit of appeal away from that theme. For traders that do want to implement trend continuation strategies on the Dow, a fresh higher-high above this morning’s swing around the 38.2% retracement could re-open the door for as such.

This would give the appearance of further diminished selling pressure.

Dow Jones Hourly Price Chart

Dow Jones Hourly Price Chart

Chart prepared by James Stanley

Trading Swings

If the Dow does not push up to a fresh near-term high, there may be another approach of interest for bulls. That would be a re-test of this morning’s support around the 50% marker of the Q3 bullish move, and this level is nearing confluent with a bullish trend-line last Thursday’s low to yesterday’s low, and a hold of support in this area could be looked to for short-term bullish swing strategies.

Dow Jones Hourly Price Chart: Support Potential at Prior Short-Term Resistance

Dow Jones Hourly Price Chart DJIA DIA

Chart prepared by James Stanley

You may also be interested in:

The Dow Spends a Week at Support: Will Bulls Follow-Through?

Equity Forecast for Dow, S&P 500, DAX, FTSE and Nikkei

Day Trading the Dow Jones: Strategies, Tips & Trading Signals

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q3 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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