Technical Analysis on the Dow – 23 Dec 2013

Edited by Vani Rao

On 20 December 2013, amidst the US Government’s report showing that the economy was on its fastest growth phase in two years last quarter and the Fed’s announcement of a $10-billion tapering in January 2014, the Dow Jones Industrial Average (DOW) ended the day higher at 16,221.14, up 0.26%, from its previous close. At the current levels, the Dow sees selling pressure coming in the near term and could see a short-term pullback from the current levels. The candlestick formation suggests a formation of Advance Block (AD block), which suggests the end of the uptrend in the near future. WSA still believes that the Dow’s long-term story remains intact and we are likely to see more of an upside in the near future.

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Technically, the Dow Jones Industrial Average is trading above its 20-day, 50-day, and 200-day simple daily moving averages, indicating a bullish trend going forward. However, strength indicators like the RSI and Willam%R suggest an overbought teritory and indicates a Sell at the current level. Trend indicators like the MACD is above the Signal line, and positive indicators suggest a bullish divergence from the Signal line. Moreover, the Index is likely to fall further from this level in the short term. However, in the long run, the Index could witness some strong strong upward momentum.

Moving Average Convergence and Divergence (MACD)

Source: Bloomberg
Source: Bloomberg

Relative Strength Index (RSI) – Sell

Source: Bloomberg
Source: Bloomberg

Willam %R (WLPR) – Overbought

Source: Bloomberg
Source: Bloomberg

Bollinger Bands

Source: Bloomberg
Source: Bloomberg

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