Stock Trading Predictions & Technical Analysis: Dow Jones

Tuesday, November 17, 2009

Dow Jones - Accelerating the Up Trend

Dow Jones - STRONG BUY SIGNAL

The Dow Jones has given us a STRONG BUY SIGNAL today after holding on to yesterday's gains while hitting a higher high and higher low. For a 2nd straight session the Dow Jones has managed to stay above its up channel trend that hadn't been broken for the last 4 months. The Dow Jones now looks to accelerate its up trend. The top channel line may now become the support level for the Dow Jones, and we may not see the pull back we have gotten use to in the last few months when the stock remained within the channel. Despite the stochastic also giving another BUY SIGNAL, I do advise to be cautious as the Dow Jones is in overbought territory and at strong resistance levels within both the stochastic and the RSI. To confirm this STRONG BUY SIGNAL, I would like to see the Dow Jones make a stronger move higher and get near if not over 10500. The Dow Jones appear to perhaps starting a new trend, which is still up. The Dow Jones has started to built some support at 10400, and seeing the Dow Jones bounce back up from this level (closing higher from it) will reinforce it. Another possibility is to temporarily see the Dow Jones continue steadily and slowly higher along the up trending channel line. A break back down, could be triggered by a sharp move down. I do believe that when we do start getting our next pull back it may happen more quickly and make sharper moves down. With that being said I do advise to be cautious with your long position and locking in gains or protect yourself from big losses by always setting Stop Loss orders. However, as the Dow Jones continues higher you do want to have long positions and not miss out on all the action. However, you have be very careful and do not let greed take over. What I fear from an accelerated move up from the Dow Jones is seeing it followed by a big crash. For now this is pure speculation. However, if the Dow Jones starts for example to move quickly towards 11500-12000 with very little pull backs you want to be very careful and lock in your gains and prepare yourself in the event where you would see a sharp move back down. Basically what I'm saying is as long as the Dow Jones moves higher you want to be long and make as much as you can, but you must never forget to protect yourself with Stop Loss orders. Stop Loss orders are like insurance, and it's free so why would you take the risk of not taking it.

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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.