Saturday, 13 October 2012

Bullish or bearish a pull back up is imminent

In today's analysis we post two charts of DIA (SPDR Dow Jones Industrial Average ETF) and DJIA as per the request of one of the blog's supporters. We hope our followers could take advantage of this analysis and that it will help them in trading.

DIA and DJIA are moving in parallel and price action is very similar to what S&P did. Although DIA and DJIA have made new highs at the beginning of October, their decline has been steep and impulsive. Our most probable wave count is that both ended wave C or are very close at its bottom. Both have reached the retracement of 50% relative to the last bottom (DJIA 13000 area and DIA 129,36). Even if both have made a longer term top in early October, price movement is expected to be upwards just for a decent retracement. The first signs that a pull back or resumption of the uptrend will be the break of 134,10 in DIA and 13428 level in DJIA.
 DIA is currently under the middle pitchfork. A break above it and specifically above 134,10 will commence an upward move that will try to reach 135 and then 136. Resistances are strong in the area 133,98-134,50. Support near 132,50-70 if broken early this week will push prices towards 131,50. We expect prices to bounce higher from the start of the week. If this does not happen then probably wave C is not over yet. But until which level can we label this as wave C? A break below the 131 level will be sign of extreme weakness. We can only be sure if  this is a C wave only if one of the extremes is broken(136.44 high or 129362 low).

 DJIA is also trending downwards with our most probable scenario being that we are in wave C. DJIA closed right on the 13330 support level. Wave C might have finished or will soon be. A break above 13400-430 will confirm that the move from the early October top has finished. We believe that a new uptrend will begin. Our bearish alternative is that once the move from the 13661 top is finished, we will see an upward retracement towards the 13550 level and the downtrend will resume. In either case an upward push is expected soon.

Concluding I would like to point out that being short at these levels should be treated with caution. If the resistance levels I mentioned break, the upward move could be very strong as I expect a new upward wave to start. If the market bounces as expected by our analysis early this week, but finds it difficult to move above resistances during the next weeks, then it would probably be wise to go short with a stop placed at the early October highs.

Thank you for taking the time to read my post and I hope it helps you with trading. Feel free to contact me if you have any question.

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