Bottom line: Dow Jones has carved a meaningful top at 29600 levels and is bearish against the same. Expect pullback rallies to be well capped below the 29600 resistance, going forward.
Technical Analysis:
Dow Jones is meticulously in control of bears and this could still be the beginning of a much larger correction that started from 29600 levels on February 12, 2020. Looking into the wave structure since then, the Dow Jones has dropped between 29600 and 24700 in an impulse, hence labelled as potential Wave 1 or A on the chart. The subsequent pullback rally could be Wave 2 or B and Wave 3 is underway towards 21600 levels at least. Alternately, the counter trend rally towards 27124 could be lower degree wave a, in case of a potential expanded flat in the making. The recent drop to 23500 could be wave b within the expanded flat and Dow Jones could rally towards 27000 levels again to complete the corrective Wave 2. In either case, bears seem to be in control for now and traders might be willing to sell on each corrective rally. In case of Wave 3 progression, the corrective rally might find resistance around 25500 levels before resuming lower again. If an expanded flat is underway, then we could expect a 5 wave rally reaching up to 27000 levels, before resuming lower again. It might be a safe trading strategy to prepare to sell on rallies through 25500 and add further towards 27000 if prices reach there. The protective stop might be placed above 29600 and traders might be targeting below 21600 as the initial target. Please note in case of a larger degree impulse drop, Dow Jones is expected to travel well beyond the 21000 mark. Exercise patience while the counter trend rally plays out.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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