the Dow Jones Index (US30) is back in the uptrend after a lengthy sideways correction.
As mentioned in our previous analysis, the correction turned out to be a wave 4pattern (green) which respected the shallow Fibonacci levels. Let’s analyse what to expect next.
Price Charts and Technical Analysis
The US30 daily chart has 7 daily candles that were unable to break for a higher high. This certainly indicates a small pauze and indecision within the uptrend:
- However, the moving averages are indicating that the uptrend remains strong. The 21 ema zone is showing a steep angle. Plus the gaps between all of the moving averages are only increasing (purple arrow).
- Price action seems to be in a wave 5 (pink) of a larger uptrend (wave 3 purple) after completing an ABC (grey) in wave (pink).
- The current push up could be part of waves 3 as long as price action keeps respecting the daily 21 emas. This could occur via a breakout (blue arrow) or after a pullback (orange arrow) and bounce (green arrow).
- A break and close below the 21 ema (orange pauze circle) could indicate the end of the wave 5 (pink) whereas a break below the support (red stop circle) makes it likely.
- That said, a strong bearish retracement only invalidates the waves 3 but not the entire uptrend because price action could still bounce at the 144 – 233 emas.
On the 4 hour chart, we can see the bullish wave outlook if the pullback is shallow and the waves 3 remain valid:
- The current sideways price action is probably part of a wave 4 (green).
- A larger bearish ABC (black) pattern is expected within wave 4 (green).
- The break below the 21 ema zone (orange arrow) could confirm the wave C.
- A retracement lower will probably aim at the 23.6% and 38.2% Fibonacci levels.
- A bear flag (grey arrow) could indicate a deeper push lower (orange arrow).
- A bullish bounce (blue arrows) at these Fib levels could indicate the end of 4 (green).
- Only a break below the 50% Fib places this on hold (orange) or invalidates it (red).
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.