Dow Jones Testing 50% Fibonacci Level After Wedge Break
The Dow Jones Industrial Average(DJI) ended flat, gaining $39.4(+0.17%) in today’s trading session with a close at $23,515. Price has created two small doji candles over the past two days with today’s doji candle topping out right at the 50% Fibonacci retracement level before price fell back down and closed near the days opening price. A doji is a candle with a small body and small upper/lower wicks and represents trader indecision, with price closing at, or near, where it opened which indicates that neither bulls nor bears were able to move price in either direction with conviction.
Price is finding resistance at the 50% Fibonacci retracement level which has acted as price resistance for the past week and a half. The 50% Fibonacci level represents the halfway point between the all time high(100%) and the coronavirus selloff low(0%) and defines whether price is in a bullish or bearish trend. Price trading below the 50% level indicates a bearish bias for price, while trending above the 50% level indicates a bullish bias. The past three daily candles are all gray which indicates no momentum behind price according to my candle color momentum algorithm, so price is indicating that there is no strength right now as the 50% Fibonacci level is being tested.
The Relative Strength Index(RSI) shows the green RSI line trending just above the 50 level which is the midpoint of the total RSI range. An RSI reading above 50 indicates short-term bullish price momentum while a reading below 50 indicates short-term bearish price momentum. The purple RSI signal line has leveled out after recently moving higher which indicates that intermediate-term momentum is losing strength.
The Price Percent Oscillator(PPO) shows the green PPO line has leveled off after recently crossing back above the 0 level. A PPO reading above 0 indicates bullish price momentum while a PPO reading below 0 indicates bearish price momentum. The purple signal line hasn’t moved above the 0 level which means that the short-term momentum behind price has yet to turn completely bullish. The green PPO line rising above the purple signal line indicates that there is short-term bullish momentum, but in generally you want to see both of these lines rising together as a sign of strength behind price, right now both are leveling out.
The current view on price remains neutral with a bearish bias due to the recent breakdown of the rising wedge pattern, combined with the gray/neutral price candles and the failing of price to move above the 50% Fibonacci retracement level. The expected move going forward is a move lower down to the target area shown in red. This target area is a measured move based on the base of the rising wedge pattern shown by points A and B. After price broke below the rising wedge, the difference in price between points A and B was subtracted from the opening price of the first candle to break below the wedge which gives us a lower target down near $19,000, or about -18% below current price. Once price broke below the rising wedge, and the red dashed line(previous stop-loss level for long trades) a short trade was entered with the new stop-loss level shown in blue dashes. As long as price is trading below the blue dashed line at the local highs the short-trade can be held. Should price break above the 50% Fibonacci level and take out the recent highs the short trade will be closed and a new long trade could be entered.
Price is finding resistance at the 50% Fibonacci retracement level which has acted as price resistance for the past week and a half. The 50% Fibonacci level represents the halfway point between the all time high(100%) and the coronavirus selloff low(0%) and defines whether price is in a bullish or bearish trend. Price trading below the 50% level indicates a bearish bias for price, while trending above the 50% level indicates a bullish bias. The past three daily candles are all gray which indicates no momentum behind price according to my candle color momentum algorithm, so price is indicating that there is no strength right now as the 50% Fibonacci level is being tested.
The Relative Strength Index(RSI) shows the green RSI line trending just above the 50 level which is the midpoint of the total RSI range. An RSI reading above 50 indicates short-term bullish price momentum while a reading below 50 indicates short-term bearish price momentum. The purple RSI signal line has leveled out after recently moving higher which indicates that intermediate-term momentum is losing strength.
The Price Percent Oscillator(PPO) shows the green PPO line has leveled off after recently crossing back above the 0 level. A PPO reading above 0 indicates bullish price momentum while a PPO reading below 0 indicates bearish price momentum. The purple signal line hasn’t moved above the 0 level which means that the short-term momentum behind price has yet to turn completely bullish. The green PPO line rising above the purple signal line indicates that there is short-term bullish momentum, but in generally you want to see both of these lines rising together as a sign of strength behind price, right now both are leveling out.
The current view on price remains neutral with a bearish bias due to the recent breakdown of the rising wedge pattern, combined with the gray/neutral price candles and the failing of price to move above the 50% Fibonacci retracement level. The expected move going forward is a move lower down to the target area shown in red. This target area is a measured move based on the base of the rising wedge pattern shown by points A and B. After price broke below the rising wedge, the difference in price between points A and B was subtracted from the opening price of the first candle to break below the wedge which gives us a lower target down near $19,000, or about -18% below current price. Once price broke below the rising wedge, and the red dashed line(previous stop-loss level for long trades) a short trade was entered with the new stop-loss level shown in blue dashes. As long as price is trading below the blue dashed line at the local highs the short-trade can be held. Should price break above the 50% Fibonacci level and take out the recent highs the short trade will be closed and a new long trade could be entered.
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