Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.07

Extremely bullish sentiment...

The reverse zone of yesterday turned out to be a fake one and the wedge pattern was also invalidated as the prices moved higher on strong bullish sentiment.

I am still looking though for a reversal or at least a down correction towards the 10,800 zone (half of the rally…if it stops in this area). There are also local lows and highs that strengthen this area as a support.

The main reason I am waiting for a correction (or a down move) is that there are 2 possible scenarios that indicate the same thing: the first is that we are still in a final wave down and we need one more swing down (in this case I am expecting a retest of the 10,550 support area) and the second is that if we are at the beginning of a up move we should see a wave b or 2 that are both corrective.  

Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.06

The resistance of yesterday seems strong enough

Wave 4 is probably done by now, as the reverse from the resistance zone ($10,985-$11,065) is underway.

The most probable scenario is the development of wave 5 that should take the prices to the previous lows of 4^th of October (10,400). However, there two supports at 10,800 and 10,700 that are standing in front of another move down.

The main resistance is still in the same area (plotted in the chart) as yesterday and we could witness a second retest before the decisive break. 

On a shorter time frame I plotted a rising wedge to incorporate the most recent price action. This pattern is a high probability of indicating a down move and the support zone is set at 10650-10,800 area (fibonacci levels).

My call is that we will hit the previous lows as we are currently in the 5th wave and this rally seems to have a corrective look.

However, the mid way down (the support area mentioned above) could turn out to be a strong support and reverse the price towards new highs (above 11,000); in this case we could label this past rally as a wave 1, the first wave of a 5 wave move up.

Crude Oil (WTI) Technical Analysis 2011.10.06

Rising wedge on Crude Oil

As I expected, the price action around the bottom zone in Crude Oil ($75.30-$77.00) was bullish for yesterday and this morning, as the price hit the T1 trend line a few hours ago.

The first resistance of the previous analysis ($79.60) is now a support but this level is important as the price oscillated around it for a while. The question is now if the buyers have enough strength to break the T1 trend line without any significant correction.

The most recent price action can be defined as a rising wedge that usually breaks down. One other important fact is that we can spot a 5 wave move from the bottom that could mean the end of an impulse. If this will be the case, we are at the beginning of a longer up move(this being wave 1).

On the 4 hour chart the bigger picture shows a clear down trend that reversed from the previous lows area. The rally came up to the 61.8% retracement level that is in the same area as the T1 trend line (this is resistance).

One other reversal sign (to the downside) is that the stochastic oscillator shows an overbought market in a clear down trend.

Bottom line: there are more evidence that indicate a reversal towards the down side and, therefore, I expect that this area will form a reversal point. 

However, there is no such thing as a 100% scenario; that's why we can expect some more signals that indicate a trend resuming.

Crude Oil (WTI) Technical Analysis 2011.10.05

Crude Oil set up for a possible rally

The Crude Oil (WTI) price made a bottom in the $75.00 area yesterday by creating a double test of the support; this kind of bottoming pattern can produce important rallies.

Focusing on the most recent price action, the $77.00 area is clearly an important level of support (currently) and the presence of enough buyers here will turn back the price towards the up side.

The main resistance (and target in this situation) is set in the $79.60 area and this means that the price is in its half way distance of a possible up swing. This scenario is sustained by the consolidation pattern of the last hours that resembles the most with a flag (half-mast pattern).

Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.05

Looking at a possible rally

The 10,450 area turned out to be a good support for the DJIA and the base that i was hoping to see developing produced really quickly, in yesterday’s session.

The last hour of yesterday trading on NYSE revealed the optimism of the investors for the future couple of days (I am not discussing the fundamental news that were assumed to move the market, I talking strictly technical).

The 10,664 level was the main resistance on yesterday’s chart and the break of it, followed by the retest today (on the futures market) set a strong support in the 10,664-10,700 area.

The main target on this rally (if it is going to be one) is in the 11,000 area where more resistance levels are set (not all are shown on the chart due to space limitations). Keep in mind that we are still in bear move on the bigger picture!

On the 5 minute chart there is a flag pattern that emerged and is retested in present. 

If the buyers will keep their demand high we will see the continuation of the up move started yesterday. 

One important fact that sustains a rally is the break and retest of the t2 down trend line.

Dow Jones Industrial Average (DJIA) Technical Analysis 2011.10.04

Possible falling wedge pattern on DJIA

Nice swing down on DJIA beginning from 27^th of September; both the targets in the previous analysis were achieved (10,950 and 10,550) (se DJIA analysis from 2011.09.28).

The Elliot Wave perspective shows a 3^rd wave developing that could go lower than the previous lows from the 23^rd of September ($10,550). I have no evidence of a possible reverse yet but if there will turn out to be a notable one, we should see a base forming in the area $10,450-$10,660.

On the 4H chart the last test of T1 trend line set the market for a sharp decline (see the 2011.09.28 analysis) that took the prices down towards the last local bottom (10,550 area).

The fifth wave down is likely to form a wedge pattern (though we don’t have enough evidence yet) and the target level is very hard to set. The trend is still short and until we see a bottom pattern we cannot create a bull (rally) scenario.