DJ30 Technical Analysis: Bearish From Current Levels

Digital Derivatives MarketsGlobal Indices, Trade Alerts

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DJ30 Technical Analysis

It has been a while since we issued a trade alert for the US indices.  We have be monitoring the stunning bullish reversal since mid-October, searching for cracks with a magnifying glass and we may have just discovered a technical event that allows us to initiate a short trade. We do not wish to over-expose ourselves the US indices ahead of the Non-Farm Payrolls on Friday so we are focusing on the DJ30.

DJ30 Daily Chart

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Dow Jones Tradinf Strategy, 4 December, 2014

Dow Jones Daily Chart 04/12/14

A firm resistance is noted at 17,897 that may develop into a double-top reversal pattern within the next several sessions. A resistance is level is critical in order to establish a short trade in the market. Naturally, a resistance level is insufficient to execute a short trade.

DJ30 30min Chart

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DJ30 Technical Analysis, 4 December, 2014

DJ30 30min Chart, 04/12/14


DJ30 15min Chart

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DJ30 Intraday Strategy, 4 December, 2014

DJ30 15min Chart, 04/12/14

We have studied multiple intraday times frames of the Dow Jones 30 and noted reversal patterns, Shooting Star and Bearish Engulfing were painted on the hourly, 30min and 15min charts. The monthly chart Relative Strength Index (RSI) is in negative divergence, affirming the possibility of a bearish trend in the index. We must admit we are unable to find a fundamental trigger aside the European Central Bank (ECB) press conference on Thursday, which currently negates the bearish outlook for the Dow. Our experience taught us to place our faith in the graph as long as a conservative risk management is exercised.

The corrective weakness we expecting may develop into a shaper reversal although it is rather early to determine it as the anticipated scenario for the Dow.  We will post updates regarding the trade at the bottom of this page when found relevant. You may subscribe to DDMarkets if you wish to be notified when such updates are made. Our latest trading strategies are displayed at the homepage.

In Wednesday’s session, despite the worse-than-expected US ADP figures Bunds remained elevated as hedge funds predict a bullish effect from the ECB on Thursday. In regards to DJ30, current levels may be attractive for profit liquidation, which will trigger the corrective weakness we are anticipating. Many may disagree with our observation in the market but we are simply following the charts as long as a decent Risk-Ratio (RR) is maintained.

DJ30 Trading Strategy

A tight protective stop loss order will be used for trade as we expect the weakness to begin in the Asian session. Our goal is to have the proactive stop at the entry ahead of the Non-Farm Payrolls. If our analysis is correct we are entering at the peak of the DJ30 just before the reversal will take place. We execute a short trade in the Dow Jones 30 at market price, protective stop layered at 17.964, targeting 17,680.

04/12/14 UPDATE: DJ30 is trading at  17,811 at the time of this writing. Protective stop is shifted to the entry and we close 35% of the short trade at market price.

08/12/14 UPDATE: With a slight delay, reports from ECB members that Draghi may consider a EUR 1 trillion QE in 2015 sparked a moderate rally which triggered the protective stop loss at the entry. We were able to realize a fair profit from the trade. More market analysis is available at the homepage.

23/12/14 UPDATE: Please note we have re-initiated a short trade in DJ30 in the following trading strategy.

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Last Updated on August 8, 2015