technical analysis US30

Technical analysis of US30

US30, the representative CFD on the Dow Jones Industrial Average, has continued to make gains today. Click on the image to magnify. 25,000 earlier this morning GMT was a two-month high. This technical analysis of US30 looks at some areas on the four-hour chart that might be important over the next few days and weeks.

Much of the relative positivity in American equity markets so far this week comes from Asian and European shares having made gains, although often amid fairly high volatility. The likelihood of unlimited quantitative easing continuing in the USA is also giving shares a boost.

High resistance on this chart appears to be the current area around 24,500-25,500. This was the initial breathing point during late February’s losses. Low support is around 23,000, the low point for May so far.

Technical indicators on US30 H4

 

Moving averages print a stronger buy signal this week, with the 50, 100 and 200 SMAs successively above each other and below price. The 50 SMA has also extended significantly above the 100 so far this week. The first clear support from MAs is the initial value area between these two. If this is broken, the zone between the 100 and 200 SMAs could be the source of a bounce or at least a pause before more losses.

The slow stochastic (15, 5, 5) prints a clear overbought reading at 93. This combined with fairly low volume would usually suggest retracement downward over within the next few days. There’s no sign of saturation from Bands (50, 0, 2) but the deviations remain very widely spaced, so volatility could remain high this week.

Price action and Fibonacci

 

Recent price action supports the positive picture from moving averages, with the penultimate period forming a classic upward engulfing pattern. We can also see three soldiers at the beginning of last week which have yet to be followed through significantly. Given the lack of volume so far this week due to the holiday in the USA yesterday, immediate direction might be more clear in the middle part of today’s American session.

Fibonacci retracement here has been drawn based on the overall downward movement on the daily charts from February to late March. The clearest support is the 50% retracement which has supported weak gains since early April. The next main hurdle from Fibo for buyers is the 61.8% retracement, slightly above the top of this chart.

Technical analysis of US30: summary

 

TA in general suggests that US30 could continue to make gains over the next few weeks. However, a retracement should probably be expected fairly soon given the situation of overbought from the stochastic. Traders should also monitor fundamentals closely this week; an uptick in the strength of the American government’s rhetoric against China might drive significant losses in the short term at least.

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