Stock Trading Predictions & Technical Analysis: Dow Jones

Tuesday, August 17, 2010

Dow Jones - Time to get back in

Hi, everyone I know I've been away for a long time and haven't written anything on my blog for 2 months as I am very busy, but I felt that I had to write an analysis of what I expect to see occur in the market in the upcoming weeks and months. I haven't had the time to monitor what has been going on in the market as of late, but I did start looking at the charts again since last week, particularly the Dow Jones. I am not sure at what frequency I will be writing on my blog, as I am very busy, and I cannot promise that I will be able to make timely updates. As you can see I no longer update my blog regularly, but may still do so from time to time. There may be periods where I write very little like recently or a little more if I find the time. I will try my best to write analysis when I see major developments or trends occur in the market.

Dow Jones - BUY SIGNAL

Obviously the Dow Jones had been in a minor down trend for the past week, but after seeing a sign of a possible rebound yesterday and a good move up today this was enough for me to convince myself that the Dow Jones is now looking to resume its major up trend. I do believe that today was the beginning of a move for the Dow Jones towards at least back up to 10900 or 11200. This may not move straight up towards those levels, but I do expect the tendency for potentially the next 2-3 months to be up. However, I strongly believe that if or when the Dow Jones does hit those levels that we will have a double top and the beginning of a major down trend that could likely send us back towards the lows of 2008, where we might probably find ourselves in a new crises. This may be a little too early to say, but as of right now this is what I expect to see happen. In the mean time, I am looking to get in on a few stocks tomorrow as I am currently all in cash. I think that there is some good money to be made on the long side for most stocks, with a few exceptions of course.

When we analyze the Dow Jones' daily chart, we can see that we got a doji bar yesterday which hinted that the current minor down trend had bottomed. What straightened this possibility is the fact that the doji that occurred yesterday traded below the 50 day MA before bouncing back up and regaining practically all its daily losses and thus closing above the 50 day MA support level. Today we had our first confirmation of the bottom by seeing the Dow Jones move strongly back up with a higher low and higher high. However, as I expected it struggled to close above the resistance levels at the 20 and 200 day MAs. I don't expect to see the Dow Jones have too much trouble closing back up this level, but if there were to be any it could be for only a day or two starting tomorrow. That's why I believe tomorrow should a good day to make an opening long position. As long as the Dow Jones stays above the 50 day MA, I consider to be safe to take a long position. What leads me to believe that the Dow Jones will continue its major up trend potentially quickly (2-3 months) towards its yearly highs is the fact that today's up move triggered a BUY SIGNAL by the Stochastic at a very oversold level around 15-20. Now when we look at the trend for the longer term, it seems like the Dow Jones is in the middle of a rising wedge pattern which may conclude near the yearly highs before reversing strongly back down. It is however too early to say, but as of right now this is what I expect to see occur.

1 comment:

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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.