Stock Trading Predictions & Technical Analysis: Dow Jones - Bounces off critical support level over its 50 day MA, as expected

Monday, October 5, 2009

Dow Jones - Bounces off critical support level over its 50 day MA, as expected

Dow Jones - BUY (updated October 6th)

October 6th update: The Dow Jones has now gained over 100 points, and we can now confirm that the uptrend has resumed. It is now safe to take long positions.

As expected and posted last Thursday, the Dow Jones Industrial Average has bounced back its critical support level over its 50 day MA. The uptrend seems like it will resume, but I don't want to be ahead of myself and will wait to see if indeed the Dow Jones closes higher again tomorrow to confirm the BUY signal. For now I will maintain a HOLD signal. If the Dow Jones does indeed close higher tomorrow and thus continue its trend up, we could see the Dow Jones go as high as 10100 before its next pullback (it is hard to exactly estimate with stocharts' charts). As I expected and hoped, we saw the Dow Jones gain just over 100 points (~+1.00%), adding strength to this bullish up trend continuation signal.

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.