02 Apr Brief Continuation of Short Term DOW Analysis
Following on from this post where probability suggested the small rising channel seen on the 4 Hourly DOW chart would likely break to the downside, we’ve actually seen the opposite occur.
The short position I held at that time was stopped out at break-even and I now hold a long position with stops at break-even.
The following charts should just be viewed as information only because they’re based only around a short term view, whilst momentum and sentiment can change very quickly. Over the last fortnight my day trading system hasn’t really triggered any new long positions, with the last one being at 14,386 on 18th March. However, it has been signalling a number of potential short set-ups but none have actually triggered an entry. This could imply that large players have begun positioning ready for a correction, but until a short signal actually triggers, the best position is to stay flat, or remain long with the trend if you are already positioned long.
Tonight the system again signaled a possible short set-up but with the caveat that a break of today’s high could extend the rally significantly further! Well that’s no help to anyone as things stand but it explains why I’m holding a day-trade long position overnight and with the help of the charts below we have a better picture of whats going on.
Firstly the Hourly chart has formed a support line in the 14,547 area and therefore this is the line in the sand for now – Above this level the trade is clearly long, below it we can start considering the possibility of a forthcoming correction:
Meanwhile the mini 4 hourly channel detailed in the chart posted last Week has broken to the upside and the retest shown in the red circle marks the level I entered tonight’s long position. The re-test of this channel did come too quickly, a strong market should have rallied further before retesting the break-out level so this is not a high probability trade until we see a decisive break of today’s high, but if we do break today’s high, MACD has plenty of upside room available to make the most out of an extension of the current rally. Nonetheless, my stop loss will remain at break-even as neither the Hourly or this 4 Hourly chart offer anything solid as to the next Market direction:
Of course, I’m still watching the SPX and FTSE long term charts and their reactions to the possible resistances drawn on those charts will almost certainly influence my longer term stance.