DOW / INDU Brief Analysis; 29th November 2012

DOW / INDU Brief Analysis; 29th November 2012

I have a bit of a Dilemma. Entered a DOW long today at 12,870 which is currently showing +105 pts.

Based on today’s price action and the fact we are entering December you have to consider that the base is now in for the Santa rally. At the same time however, we have this stat I posted on the ADVFN forum last night which suggests switching short tonight:
64% chance of a green close tomorrow (Wednesday).

67% chance of a profit if you short tomorrows close and cover on Friday’s close.
That 67% is based on the last 3 years data, but if you take off the last Year, the odds rise to over 90%, which does mean shorting 3rd to last day of the Month is no longer as reliable as it used to be.

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So looking at the chart for further enlightenment, things become even more complex.

4 Hourly shows good support being offered at the 100 MA and a subsequent rally that ran straight into double resistance in the form of a channel combined with horizontal resistance. A candle close above this resistance would be a powerful signal, but until then, what we actually have is a marginally lower high. In theory at the very least price should hang around this area to test the green 200 MA:

Moving to the Hourly and we have the possibility of a newly formed up-channel, positive MACD divergence; it might be small, but it’s divergence, and divergence on the Hourly time frame over such a small space of time is not to be ignored.

On this time frame, 13,045 is the next obvious resistance level.

The green 200 MA is pointing up and has twice now supported price. We also have what appears to be the first higher low, although not confirmed without a higher high, which is yet to come:

All in all, despite the stats, it would appear from the charts that bulls have very good chances here, but the stats don’t fully support that just yet, and nor does price without a confirmed higher high.

As tempting as it is to bank a nice 100 point intraday profit, the possibility that a low is in place makes keeping the trade an attractive proposition, with stops on an Hourly close below today’s low (though in reality I doubt I’ll let the trade go back beyond break-even).

2 Comments
  • RS2OOO
    Posted at 21:02h, 29 November

    I covered half the DOW long today at predicted resistance of 13,047 as per the Hourly chart above giving a profit of 177 points.

    Will continue to run the 2nd half of the trade, but remain aware that the last trading day of the Month is generally bearish.

  • RS2OOO
    Posted at 22:50h, 04 December

    2nd half of DOW long stopped out on trailing stop at 12,927 for + 57 pts.

    This gives an aggregate profit on the trade of 117 points.