MagicPoopCannon

Diamonds Aren't Forever. The (DIA) DIAMONDS!!!

AMEX:DIA   SPDR DOW JONES INDUSTRIAL AVERAGE ETF
Hi friends! Welcome to this analysis on the badly beaten, Dow Jones Industrial Average             . The instrument that we will be using to review the Dow, is the DIA             ETF . Looking at the four hour chart, you can see that the Dow has been trading in a long bearish uptrend formation, known as an ascending broadening wedge (in blue.) Ascending broadening wedges are patterns that typically produce breaks to the downside, and we can see that the bottom side of the wedge was pierced in today's trading action. The pierce of the bottom side of the wedge , has weakened it as a support level . Furthermore, on the previous candle, we actually closed below the wedge . However, traders were quick to print a reversal candle — sending prices right back up into the pattern. If you'll notice, the current candle has closed below the 200 EMA (in purple.) You can see that we actually rallied above it, but closed below. As a form of reference, we haven't been under the 200 EMA , since the night of President Trump's election. That puts a bit of perspective into the significance of this development. Sell-side volume is beginning to dominate the chart, and the MACD is rapidly declining. Assuming that this is the breakdown point of the broadening wedge pattern, I have measured it's height, and subtracted it from the breakdown, to determine a potential downside target. As you can see, a corrective move, that represents the full potential of the broadening wedge pattern, would send prices down to the 61.8% retrace, exactly. I'm not saying that prices will fall there, I'm just saying that, should a breakdown ensue, that level would represent a correction to the full potential of the wedge . Such a correction would represent a 15% decline from current levels. For now, let's take baby steps, and look for evidence to materialize. First, we need to confirm that a sustained breakdown is taking place. Ideally, I would like to see the 200 EMA continue to act as resistance, pushing the DIA             back below the lower trendline . At that point, we would need to reassess the underlying indicators, to determine the validity of the breakdown. Speaking of indicators, I'd like to draw your attention to the most recent action on the volume . You can see that the volume bar all the way to the right, is a relatively short bar, compared to the ones behind it. The second bar back, is tall and red. This tells us that significantly more traders were willing to sell into the breakdown of the wedge , than those who were willing to buy the recovery back into it. On the other hand, the MACD does look like it's curling a bit, so the bulls could potentially put a bottom in here. I think that is unlikely, but my thoughts are irrelevant. We need to watch the chart, to know for sure. Look for a break above the 200 EMA and the 23.6% retrace, coupled with a bullish MACD crossover, to signal a reversal to the upside. On the downside, watch for continued pressure from the 200 EMA , followed by a subsequent breakdown below the broadening wedge . Good luck traders!

This has been your not-so-humble market wizard, droppin' knowledge like bombs in this place! Please follow, comment, like, and share on social media. Good luck trading everyone!

***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***

-MPC loves you-

-JD-
I love your analysis and i'm eager to learn. I like that you call patterns by name, so I can learn more about them.
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I like it, like it!. On Planet Earth Gravity is in Control. We can see prints below 22k before March. Keep it Real as Always!
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Hi Magic, what is the origin of the bottom line of your broadening wedge? Thanks, very informative.
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Zoomed in we have a decent bounce pattern forming and the fact that we dodged a 'black Monday event' makes me think that the DJIA will continue following BTC aka huge dead cat then huge death.
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tviewcrau PRO tviewcrau
@tviewcrau, rsi diverging as well, plus buy pressure.
+2 Reply
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