DJIA Talking Points:
- US Stocks took a hit to start this week following last Monday’s print of fresh 2019 highs in the Dow Jones Industrial Average. After gapping-higher to start this week, sellers began to push after the US open, and that’s run for most of the session with stocks now just putting in a bounce from fresh two-week-lows.
- This week’s calendar is busy and the potential for continued volatility remains after this morning’s jump in VIX as response to the sell-off. As discussed last Thursday, both a bullish and bearish technical formation had shown in the Dow Jones Industrial Average. Below, that’s updated with potential strategy points for either side.
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It’s been a fast start to the week for US stocks as an opening gap-higher was soundly faded-out of the market; and sellers have continued to push throughout the session. At this stage, the Dow Jones Industrial Average is closing in on the Fibonacci level at 25,595, which was looked at last week as a possible area of support in the index. This is the 14.4% retracement from the post-Election move in the Dow Jones, taking the low from November of 2016 up to the 2018 high. This level was last in-play in mid-February, helping to hold the highs temporarily before bulls staged another topside breakout.
DJIA: Dow Jones Four-Hour Price Chart
Chart prepared by James Stanley
Busy Calendar to Keep This Theme on Center Stage
This week’s economic calendar is loaded with drivers, including the Friday release of Non-Farm Payrolls out of the United States. This can help to keep this theme in full view as the 2019 trends of strength across US stocks come into question after a comfortable two month-period for bulls.
The bigger question here is whether something larger is afoot as far as market themes are concerned, and this is something that I had discussed in last Thursday’s webinar. As shared in that session, the Dow had built in to two different technical formations. On a longer-term basis, prices had built into a rising wedge pattern, which will often be approached with the aim of bearish reversals. On a shorter-term basis, a bull flag formation had built that will often be looked to for bullish continuation.
DJIA: Dow Jones Four-Hour Price Chart
Chart prepared by James Stanley
DJIA: Pullback of 2019 Strength or Bearish Reversal in the Making?
DJIA: Bearish Strategies
For traders looking for a deeper retracement in the Dow, the door may have just opened to such a theme given that prices have run down to fresh two-week lows in a fairly-consistent manner. For traders looking to use this potentially new theme with the aim of bearish continuation, a pullback to resistance at prior support around 25,816 could be a workable thesis. Traders could even extend that resistance potential up to the 25,880 swing lows from last week to create a ‘zone’ to follow.
Dow Jones Two-Hour Price Chart
Chart prepared by James Stanley
DJIA: Bullish Strategies
For traders that want to look for continuation of the prior 2019 bullish theme, in essence looking at this morning as a pullback, prices may be in the early stages of substantiating support above the 25,595 level. Patience could be of key importance, however, in the event that something ‘new’ is getting priced-in here, similar to what equity bears might be looking for to lay the groundwork for a deeper sell-off. For bulls, the key is waiting to ensure that support is confirmed enough to allow for entry in a risk-efficient manner.
The ‘s2’ and ‘s3’ support levels looked at last week could still be followed for support potential, with the ‘s2’ level around the 25,595 spot that was mentioned earlier; while the ‘s3’ level rests a bit-lower around the 25,266 level on the chart.
DJIA: Dow Jones Four-Hour Price Chart
Chart prepared by James Stanley
You may also be interested in:
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 Q4 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
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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
