Let’s Focus on the DJIA
Since the beginning of this week, the US stock market has been compressing between 2 converging H-4 trendlines at 18971 and 18808 respectively, forming a possible Bullish Pennant formation.
This technical pattern is considered by most of us to be a continuation setup.
Therefore, should the DJIA close above the top edge of the Pennant take place followed with a retest as Support, we would consider going in long this market, mainly due to the room seen to move further North on the bigger picture.
But, a break below the above discussed Bullish Pennant is not necessarily considered a Bearish signal, as we still have 3 areas of demand positioned below that mark.
The 1st, the lowest of the 3, comes in at 18548-18604: a H-4 demand which was formed following the break of the daily Quasimodo Resistance mark at 18636, the next Southside target on the daily frame.
The 2nd, the middle of the 3 is seen at 18629-18683: a H-4 demand base that intersects nicely with the weekly trendline support extended from the high 18365, the next Southside target on the weekly frame.
The 3rd area drawn from 18740-18801, which is also a H-4 demand barrier unfortunately has little higher frame significance so it is liable to be faked should price test this zone.
Commentary: traders have to be patient here and wait for the H-4 candles to make a decision within the 2 uniting trendlines. A break higher followed by a retest would signal to potentially buy the index. On the other side of that coin, a break lower could open up the possibility for long trades from either one of the above said H-4 demands.
Points to take into consideration:
- Fed Speakers on Friday:
- St. Louis Fed President Bullard (FOMC voter) (05:30a EST)
- Kansas City Fed President George (FOMC voter) (09:30a EST)
- New York Fed President Dudley (FOMC voter) (09:35a EST)
- Dallas Fed President Kaplan (will vote in 2017) (01:30p EST)
- Fed Governor Powell (FOMC voter) (09:45p EST)
Marks to watch/live orders:
- Buys: Watch for a close above the H-4 trendline Resistance and then look to trade any retest seen thereafter (waiting for a H4 Bullish close to form following the retest is preferable prior to pulling the trigger – stop loss: ideally beyond the trigger candle).18740-18801 (reasonably sized H-4 Bullish close required prior to pulling the trigger) stop loss: ideally beyond the trigger candle). 18629-18683 (a possible area to consider entering at market from) stop loss: 18618). 18548-18604 (a possible area to consider entering at market from) stop loss: 18537).
- Sells: Flat (stop loss: N/A)