Monday, January 18, 2010

Dow Jones (DJIA) Index Chart Pattern - Jan 15, '10

The Dow Jones (DJIA) index chart pattern shows that the relentless bull surge continues unabated with decent volume support. The index made another new high of 10767 on Thursday, Jan 14 '10. The only solace for the bears was the 100 point drop on Friday, Jan 15 '10 with volumes touching a high for the week.

Though the Dow closed marginally lower on a weekly basis, the technical indicators haven't weakened too much. The 20 day EMA continues to provide strong support to the Dow and all three EMAs are moving up.

We are now into Q4 earnings season and the future trend may depend a lot on how the corporate results shape up. Let us now have a look at the 6 months bar chart pattern of the Dow Jones (DJIA) index:-


The pattern of higher highs and higher lows indicate that the bull rally may last a while longer. Negative divergences in the technical indicators and rise on lower volumes remain concerns. But the index has continued its 10 month long climb regardless.

The RSI fell after touching the overbought zone, but remains well above the 50% level. The MFI has dropped from the overbought zone and also stayed above the 50% level. The slow stochastic has just dipped from the overbought zone. The MACD is in positive territory and touching the signal line. Negative divergence is quite clearly visible in the MACD.

Bottomline? The Dow Jones (DJIA) index chart faced some selling pressure on options expiry day, ahead of a holiday-shortened week. For abundant caution, set tighter stop-losses and stay invested. This is neither a good time to enter, nor to go short.

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