Technicals | May 28 2014
Bottom Line 27/05/14
Daily Trend: Neutral
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 16341 / 16015 / 15340
Resistance Levels: 16736
Technical Discussion
We've had a recent increase in home purchases in the U.S, and with interest rates continuing at records lows, confidence continues to be boosted in the U.S. Markets were closed last night for Memorial Day yet the tight range price has been rotating within throughout 2014 continues to back another breakout into historical highs over the coming weeks.
Reasons to buy:
→ Jobless claims lowering with signs of economic growth continuing
→ mergers an acquisitions remain active which reflects a bullish environment
→ trend remains very strong with dips shallow and well supported
→ 200 day moving average continues to remain robust and supportive longer term
The standout pattern all year has been the development of the ascending triangle. These patterns are bullish when backed by a strong uptrend and this is eactly what we have here. From our perspective the pattern has been gradually unfolding for the past 5 months and by all accounts now looks to have completed via the 5 swings we've labelled within the (a)-(b)-(c)-(d)-(e) rotation. We are also labeling this medium term coiling process as a Wave-4 and Wave-4's also typically evolve within triangle formations. Price last closed at 16606 yet any move from here that sticks above 16736, has triangle target at 17880 written all over it as part of the Wave-5 of the higher degree Wave-(3) move. From the wave-(d) high, the minor dip witnessed pretty much unwound our indicators back into an oversold position. So once again price is in a position to reestablish itself back into the longer term uptrend that has held strong since the major 2009 lows were locked into place. Concern below 16000 only.
Trading Strategy
We continue to be long the DJIA at 16632 with stops below 16015. We've been very patient with the stop position yet in doing so have been able to steer clear of the recent noise that saw levels dip to 16341. Now we just require price to kick into gear again after a 5 month breather and break back into blue sky territory, in which time we will immediately cut our risk in half on the trade. We will then trail the stop higher into profit if upside momentum can continue to gather from there.
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