$DJI - The 34,000 support is critical for the next few months!
One of the most recognized patterns in technical analysis is forming on the DJI, Head and Shoulders Pattern. A downtrend and bearish movement would be confirmed if the DJI breaks the support at 34,000 (The neckline of the pattern).
Here are some stats about this pattern:
- In 93% of cases, the exit from the head and shoulders pattern is bearish.
- In 63% of cases, the price reaches the objective of the head and shoulders pattern when the neckline is broken. (Around 31,000)
- In 96% of cases, the bearish movement continues at the break in the neckline.
- In 45% of cases, after exiting, the price makes a pullback in resistance on the neckline of the head and shoulders pattern. (Back to 34,000, it will be good timing to exit or short the market if not done)
The geopolitical situation with the conflicts between Russia and Ukraine as well as the rise of the interest rates due to inflation faster than expected will crystallize this movement. The odds are high that the movement will be bearish.
Here are some other key elements of this pattern to consider:
- The longer the movement before the formation of a Head and Shoulders (H&S) pattern is, the more forceful the bearish movement at the break of the neckline will be. (4 months is this case)
- The more abrupt the movement before the formation of a Head and Shoulders (H&S) pattern, the more forceful the bearish movement at the break of the neckline will be.
- Head and shoulder patterns with an upward neckline offer better performance.
- If the left shoulder is higher than the right shoulder, the head and shoulder pattern offers better performance. (This is the case right now)
- After exiting the head and shoulders pattern, pullbacks in resistance on the neckline are detrimental to performance.
Personally, I am currently 95% cash and only trade for a few days because the situation is uncertain.
This is not financial advice but only a small personal analysis of Saturday morning.
Here are some stats about this pattern:
- In 93% of cases, the exit from the head and shoulders pattern is bearish.
- In 63% of cases, the price reaches the objective of the head and shoulders pattern when the neckline is broken. (Around 31,000)
- In 96% of cases, the bearish movement continues at the break in the neckline.
- In 45% of cases, after exiting, the price makes a pullback in resistance on the neckline of the head and shoulders pattern. (Back to 34,000, it will be good timing to exit or short the market if not done)
The geopolitical situation with the conflicts between Russia and Ukraine as well as the rise of the interest rates due to inflation faster than expected will crystallize this movement. The odds are high that the movement will be bearish.
Here are some other key elements of this pattern to consider:
- The longer the movement before the formation of a Head and Shoulders (H&S) pattern is, the more forceful the bearish movement at the break of the neckline will be. (4 months is this case)
- The more abrupt the movement before the formation of a Head and Shoulders (H&S) pattern, the more forceful the bearish movement at the break of the neckline will be.
- Head and shoulder patterns with an upward neckline offer better performance.
- If the left shoulder is higher than the right shoulder, the head and shoulder pattern offers better performance. (This is the case right now)
- After exiting the head and shoulders pattern, pullbacks in resistance on the neckline are detrimental to performance.
Personally, I am currently 95% cash and only trade for a few days because the situation is uncertain.
This is not financial advice but only a small personal analysis of Saturday morning.
Comment:
Bought 24,500 SDOW today @ avg of 31,99$. $DJI to reach 31,000 will be around 20% to 25% gain with the SDOW.
