Dear traders,
the Dow Jones Index (DJI or US30) showed a strong bearish weekly candle last week. The bearish wick plus the strong close near the low is indicating a potential retracement.
Let’s review the reversal charts and analyse how deep the bearish correction can go.
The DJI30 is unlikely to create a large bearish retracement. But the probability of some shallow correction has increased and is now the most likely scenario. Here are the main factors to consider:
The most likely scenario is that price action will build a choppy and shallow correction to either the 23.6% or 38.2% Fibonacci retracement level.
The uptrend is expected to continue later in 2021 after the retracement has been completed.
On the 4 hour chart, price action seems to have completed a wave 5 (orange). The current decline is probably the first price swing of the wave 4 (purple).
The alternative scenario is if a bear flag chart pattern emerges (grey arrows). For the moment though, a larger push lower is likely as long as price respects the previous top.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter.
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