Stock Trading Predictions & Technical Analysis: Dow Jones

Monday, November 2, 2009

Dow Jones - Big Market Swings

Dow Jones - BUY SIGNAL

The strong bounce back up from the Dow Jones has given us yet another BUY SIGNAL, but we have to wait for at least another up day before confirming it. One bullish sign which gives the Dow more chances of swinging back up tomorrow is the fact that we have gotten an inverted hammer formation, which usually indicates a bottom within the trend. Inverted hammer's success rate falls in the middle range of all bar chart patterns, but I'm not sure exactly what is the exact % of success. We also have the possibility of a morning start formation tomorrow with a big move up. The Stochastic also started crossing up over the signal line, but not enough yet to call the BUY SIGNAL (a move up tomorrow would most likely confirm the BUY SIGNAL in regards to the Stochastic). Also the Dow has managed to bounce back up above its 50 day MA for the past two sessions, which strengthens the support level. However seeing it hit too many time consecutively may break it down eventually. Think of it as a strong door that some people are trying to push open. Seeing it fail to being opened shows strengths but also weakens the more it gets hit. The Dow is starting to build some resistance just under 10000. One possibility is starting to see the beginning of a new trend, which is possibly sideways, and this is not necessarily a bad thing. Only positive economic news will continue to drive the market up. One possible scenario is seeing the Dow move up tomorrow and trade sideways for a while between 9700 and 10000, until breaks up or down one way or the other. A move at just over 9950 towards 10000 may be required for a clear BUY CONFIRMATION. As expected and posted yesterday, we were faced with a lot of volatility today, reminding me about what we've seen a lot in 2008. Volatility is good for day traders, but makes things harder to analyze for a swing trader like myself. I think I will continue to wait for the close of the market before giving any BUY or SELL signals, due to such high volatility.

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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.