US Dow Jones Industrial Average (DJI) – Signs of a bearish reversal

In my last article I mentioned that the DJI has more potential upside if the DJI breaks and stay above the resistance level at 8,600 points. The DJI did break above this level in the early of June but failed to stay above it after two weeks. The DJI went as high as 8,877,93 points before making its way down to close at 8,438.39 points end June. There were no positive catalysts to boost the market further upwards as compared to the month of May. The DJI is currently being supported at 8,200 points.

For the past two months, the movement in the DJI has formed a chart pattern called the “head and shoulders” which can be seen on a daily chart. This is a bearish reversal pattern and is technically confirmed once it breaks the pattern’s neckline at 8,220 points. The bearish divergences of indicators against the DJI suggest strong resistance and therefore the momentum of the uptrend is expected to be weak. These are signs of a bearish reversal pattern. The head and shoulders pattern has a price target at 7,600 points. However, there is a technical support level at 7,900 points.


Daily DJI chart with volume as at 2 July 2009 using NextVIEW Advisor Professional


Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.