Dow Testing Wedge Support & Closes Back Below 50% Fib Level
The Dow Jones Industrial Average(DJI) lost $592.1(-2.4%) for a close at $23,560 as the oil market took center stage and commanded most of the business news cycle today. The Dow is now testing the lower line of the rising wedge pattern and has now moved back below the 50% Fibonacci retracement level as well after managing to close above it on Friday. This move indicates that the 50% Fibonacci level is likely still resistance rather than support seeing as how price was unable to hold above this level for more than one trading session. I normally look for at least three closes above a previous resistance level before considering it to have turned into a support level.
The anticipated move here remains to be a breakdown below the rising wedge and am of the opinion that the recent rally off of the coronavirus selloff low is a bear market rally. The current stop-loss level for long trades remains in place near $23,000. Should price fall below that level a new downtrend will likely form; the first level to watch for potential support on a new downtrend is the 38.2% Fibonacci level at $22,551, but odds are if price reverses here the 38.2% level will be violated to the downside as well. The tentative price target on a reversal right now is in the $19,000 range, or roughly -$4,600(-20%) from today’s closing price of $23,560.
The Relative Strength Index(RSI) shows the green RSI line holding above the 50 level which indicates short-term bullish momentum behind price. An RSI reading above 50 indicates bullish price momentum while a reading below 50 indicates bearish price momentum. The purple RSI signal line has also turned up which indicates that intermediate price momentum is gaining strength, this line also needs to move above the 50 level in order for the intermediate price momentum to be considered bullish.
The Price Percent Oscillator(PPO) shows the green PPO line rising above the purple signal line which indicates short-term bullish momentum for price. The green PPO line is also beginning to cross above the 0 level which indicates that the intermediate momentum behind price is also beginning to turn bullish. A true bullish PPO reading is when both the green PPO line and purple signal line are above the 0 level.
The overall view on the Dow Jones remains neutral here, but a breach below the rising wedge pattern, and stop-loss level, will shift the view back to bearish.
The anticipated move here remains to be a breakdown below the rising wedge and am of the opinion that the recent rally off of the coronavirus selloff low is a bear market rally. The current stop-loss level for long trades remains in place near $23,000. Should price fall below that level a new downtrend will likely form; the first level to watch for potential support on a new downtrend is the 38.2% Fibonacci level at $22,551, but odds are if price reverses here the 38.2% level will be violated to the downside as well. The tentative price target on a reversal right now is in the $19,000 range, or roughly -$4,600(-20%) from today’s closing price of $23,560.
The Relative Strength Index(RSI) shows the green RSI line holding above the 50 level which indicates short-term bullish momentum behind price. An RSI reading above 50 indicates bullish price momentum while a reading below 50 indicates bearish price momentum. The purple RSI signal line has also turned up which indicates that intermediate price momentum is gaining strength, this line also needs to move above the 50 level in order for the intermediate price momentum to be considered bullish.
The Price Percent Oscillator(PPO) shows the green PPO line rising above the purple signal line which indicates short-term bullish momentum for price. The green PPO line is also beginning to cross above the 0 level which indicates that the intermediate momentum behind price is also beginning to turn bullish. A true bullish PPO reading is when both the green PPO line and purple signal line are above the 0 level.
The overall view on the Dow Jones remains neutral here, but a breach below the rising wedge pattern, and stop-loss level, will shift the view back to bearish.