Technicals | Dec 15 2011
By Robert Clayton
What can be identified here?
A bar chart pattern of the Dow Jones starting from a peak in April of 2006 and ending at a peak in August 2008 is closely resembled by the bar chart patterns starting around April of 2010 and continuing up to the current date.
From this what can we learn?
Assuming current price action continues to mirror the pattern seen between 2006 to 2009, AliomFX suggests the Dow Jones could be in for a very rough ride, with potential for a serious downturn.
While technical signals have not yet confirmed a negative signal, AliomFX still sees scope for the index to spiral to 10,500 and possibly lower. The market could fall as far as the lows seen late in 2009, which suggests levels around 9,000.
If this bearish picture fails to play out over the next 1-2 months, AliomFX expects a full recovery in the Dow Jones to a target of 12,500-14,000.
What can heighten the chances of this pattern continuing?
A move below 11,900 would confirm the market has started on a bearish trend, as this would indicate the technical patterns is also breaking down. An immediate target according to AliomFX is 10,500 and if this were breached the next objective would be 9,600.
Conclusion
The key to such a pattern is whether or not prices can follow the August 2008 decline, which is indicated by peak (2).
Robert C. Clayton, Technical Analyst • For further information please contact AliomFX 1300 885 686 or visit www.aliomfx.com.au • Chart source Meta Trader. Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
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