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Monday, December 14, 2009

Dow Jones (DJIA) index chart pattern - Dec 11, '09

The chart pattern of the Dow Jones (DJIA) index continues to face overhead resistance from the 10500 level, and closed twice below the crucial 10360 level during the week.

The battle between the bulls and bears remain inconclusive, as the index finished 82 points higher for the week - but at the same level where it closed on Dec 1 '09.

Last week I had mentioned about the formation of a bullish ascending triangle pattern that should have an upside breakout. Let us see if the 6 months bar chart pattern of the Dow Jones (DJIA) index is supporting such a bullish prognosis:-

Dow_Dec1109

The 20 day EMA provided good support to the index last week as the bears tried to wrest back the initiative from the bulls. The 50 day and 200 day EMAs are moving upwards. The bulls are under no immediate threat.

The declining volume on down days are a concern. But the technical indicators are showing signs of bullishness. Both the RSI and MFI have moved above their 50% levels. The slow stochastic bounced up from its 50% level and the %K line had a bullish cross above the %D. Only the MACD is looking weak - positive but below the signal line.

Bottomline? The Dow Jones (DJIA) index is all set up for a Santa Claus rally. The up tick in November retail sales may be just the trigger. Keep trailing stop-losses and enjoy the ride.

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