Hope y'all had a good weekend. Last week we had some more volatility with a $240 drop, then some recovery. Is this the "End of the Rainbow" for the Bears, or a "Bull Trap"? Let's take a look:
Here is a portion of the 5-Year Weekly Chart of the $INDU (Dow). You'll notice that we have begun to head down towards the top of the Major Resistance Line (support for us now) of the Major Ascending Channel (in Blue). If we bounce from here and continue up, this may signify a NEW Ascending Channel may have formed, and we could then use those support and resistance lines for analysis. But let's stay with what we DO know now. Let's take a closer look:
You'll notice that the $INDU has bounced off the aforementioned Major Ascending Channel Resistance line a couple of times already. Also, the MACD and STO are favorable towards an upward push. However, that being said we also have some other things to contend with...bad economic news, the forthcoming "Sell in May and Go Away" mantra, and more importantly, that Diagonal Resistance line I drew from the recent price action. At this time, it almost looks like a Decending Triangle since we are making Lower-Highs, and Equal-Lows. There is also talk that this "correction" is not over yet.
In Wall Street terms, a "correction" is a market drop-off of ten percent (10%). I have marked where that would fall to in a green box with "10%" in it. Once it hit there, it MAY be time to get into some positions. That would be an area where there could be some bargain hunting. Of course, I said "MAY" because if it hit there, we would be in a downtrend up to that point, so you need to be careful.
By the way, SBUX hit a bounce (like I predicted as a Triple Bottom) and took off on Friday. Full disclosure, I got taken out of this by my stop-loss on the -$240 day and did not re-enter due to Quadruple Witching Week which is always volatile. Anyway, keep an eye on it, it may come back a little bit.
Happy Trading!
Happy Trading!
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