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DJIA: Dow Recovers From Fibonacci Support, Builds Rising Wedge

DJIA: Dow Recovers From Fibonacci Support, Builds Rising Wedge

James Stanley, Senior Strategist

DJIA: Dow Recovers From Fibonacci Support, Builds Rising Wedge

Dow Jones (DJIA) Talking Points:

- The blue-chip index put in a week of recovery despite the setbacks at the Dow constituent of Boeing. The tragedy last weekend compelled a large gap-lower in Boeing stock, which impacted the Dow. While the S&P 500 has recovered up to prior 2019 highs, the Dow has found resistance at prior support taken from a key Fibonacci level on the chart.

- Next week brings an FOMC rate decision with little expectation for any actual moves or indications of moves on rates. But – what the bank says about the balance sheet and future composition could have a large pull on bond markets which could, in-turn, carry impact across the risk trade and US equities.

- 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 Recovers From Early March Sell-Off

It’s been a busy week in US equities, as prices put in a strong tone of recovery in the early-portion of this week. In the Dow, this comes despite the setback at Boeing following last weekend’s tragedy: Boeing (BA) stock gapped-down to start this week, and as one of the larger of the 30 constituents of the blue-chip index, this pushed the Dow Jones Industrial Average along with it.

Boeing started the week by gapping down to support at a key area on the chart, and this has helped the Dow to perk up to find resistance at a prior area of support. Below is the Boeing Daily chart, highlighting this key support zone that could continue to have sway over performance in the Dow.

Boeing (BA) Daily Price Chart

Boeing BA Daily Price Chart

In the Dow Jones, there’s a big level of support that had helped to hold last week’s lows around 25,266; this was the ‘s3’ level looked at last week, and that support remained through this week’s open, helping to buoy prices as buyers returned and made a strong top-side push. Prices ran all the way into another key level around 25,816, which is a prior ‘s1’ support level that was looked at in these pieces, derived from the 78.6% Fibonacci retracement of the Q4 sell-off in the index. That level has thus far helped to hold this week’s highs as a short-term rising wedge pattern has built-in.

For short-term strategies, this can keep the door open on bearish biases with targets set for a re-test of supports around 25,595 and the prior swing-lows around 25,266.

Dow Jones Two-Hour Price Chart

DJIA Dow Jones Two-Hour Price Chart

Taking a step back, emphasis moves towards the 26k level and whether or not buyers can furnish a deeper recovery of Q4 losses. At this point, the November and December highs have helped to hold the 2019 advance; a move that remained very clean through most of February trade. But so far in March another tone has developed, as prices fell-below another, longer-term rising wedge formation followed by a burst of selling around the monthly open.

Next week brings FOMC, and if buyers are able to re-take the 26k level, the door could soon re-open for bullish continuation strategies targeting 26,391 and then the October high at 26,961. But, if buyers fail to make a continued push, the case for longer-term bearish strategies will carry additional strength, looking for a push-lower as the end of Q1 nears.

Dow Jones Daily Price Chart

DJIA Dow Jones Daily 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

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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