Transports Testing All Time Highs?
If we know one thing in technical analysis, all time highs are not bearish. So if the Dow Jones Transports broke out to new all time highs, would that be bearish for equities? Or would that sound like the start of a new bull market? To me it sounds like the latter, so let’s have a look at the chart!
With a new weekly close, we are inches away from the all time high. The MACD is trending bullish and the RSI is not in overbought territory. These all point to the long term trend staying intact and remaining bullish. So if we assume that the market will remain bullish, what are some targets that we should have in the back of our mind? Well if we get really bullish, we could assume that the 200% extension would be a good target.
This is not the typical way to use Fibonacci retracements, but I find it very useful. I take the Fibonacci retracement tool from the top of the 200% extension all the way down to the swing low. This helps me envision key levels of retracement in the future based on my upside target. This aligns the 50% retracement, with the all time high (100% extension), and is a key level of resistance. If we fail at this point, a logical level for support is the 61.8% retracement. This would also be a higher low and would be bullish for the long term trend.
While the RSI and the MACD are both showing some exhaustion, there is just so much room for a higher low to be made that we have to remain bullish. Anything above 55 on the RSI is a higher low. If we fail at that level, anything above 40 is still a possible bullish trend. There are no bearish divergences to worry about either! So until the market tells us not to be bullish, we remain bullish. Keep your head on a swivel!
Happy Trading!
With a new weekly close, we are inches away from the all time high. The MACD is trending bullish and the RSI is not in overbought territory. These all point to the long term trend staying intact and remaining bullish. So if we assume that the market will remain bullish, what are some targets that we should have in the back of our mind? Well if we get really bullish, we could assume that the 200% extension would be a good target.
This is not the typical way to use Fibonacci retracements, but I find it very useful. I take the Fibonacci retracement tool from the top of the 200% extension all the way down to the swing low. This helps me envision key levels of retracement in the future based on my upside target. This aligns the 50% retracement, with the all time high (100% extension), and is a key level of resistance. If we fail at this point, a logical level for support is the 61.8% retracement. This would also be a higher low and would be bullish for the long term trend.
While the RSI and the MACD are both showing some exhaustion, there is just so much room for a higher low to be made that we have to remain bullish. Anything above 55 on the RSI is a higher low. If we fail at that level, anything above 40 is still a possible bullish trend. There are no bearish divergences to worry about either! So until the market tells us not to be bullish, we remain bullish. Keep your head on a swivel!
Happy Trading!