Is the Dow Jones Index on the verge of a new high?

On the 1st of May, the Dow Jones Index reached a high of 26,701. Since that high, price went on a down trend, reaching a low of 24,603 on the 3rd of June. The Dow Jones had rallied from that low to current level of 26,233.

The decline seems to play out in a 3-waves moves. This is definitely a corrective decline. From the 1st of May to 14th of May, the decline was followed by a rally to 25,967, which is right at the Fibonacci 50% correction point. This was followed by another decline to 24,603. This low was just below the Fibonacci 127% of the first decline. That day, the candlestick was almost in the form of a Hammer candlestick pattern.

We have seen a rally to 26,273 that was followed by a possible Flag chart pattern formation. A breakout of the flag had happened and if today we can see a strong bullish candlestick, it will add credibility to the bullish Flag pattern. We will need to see a strong candle if the breakout is not going to be false breakout. The target of the Flag pattern is the length of the pole before the flag consolidation. The target exceeded the high of 26,701. The Flag target is at 27,937. Lets keep our fingers crossed.

The flip side is a possibility that this rally could be a corrective rally and is part of a bigger correction. There is a possibility of Dow going to 26,701, and dropping back to 24,603 or lower to end this bigger correction. Let watch the action tonight for confirmation and clues.

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