USA-Trading-Thread

Breakout & Rally

Dow breaks consolidation to upside, rallies fiercely to the Close.

The Dow got a solid upside break from the tight consolidation at 10,820 today, which led to a fierce 212 point rally for the day, as seen in the 15 and 60 Minute Charts. Today's breakout from the consolidation coupled with the bounce at 10,700 led to a huge 350-plus point reversal from yesterday's lows, which is huge. Look for a continuation pattern to form at the highs before another key move is seen.

The Daily and 60 Minute Charts show the 10,700 level is indeed the critical level to watch in the charts. This bounce has further solidified this level as the key support level to watch, especially since this level continues to tie in to the neck line of the large head-and-shoulders pattern from the Daily Chart. If this pattern doesn't work out to the downside, then we could get an equally great upside break opportunity.

The Daily Chart shows the Dow has formed a large triangle range, with the 10,700 support level serving as the lower boundary and the year's highs serving as the upper boundary. An upside break through this upper trend line at 11,150 could set off another try at all time highs.

For now, look for the Dow to hold on to current gain via a continuation pattern at the highs. As long as the index can remain above 10,825 we should see further strength.

Short Term Dow

The Dow closed the day within the boundaries of a tight range from 11,000 to 11,050, seen in the 5 Minute Chart. Watch this zone closely for a breakout for early direction.

Medium Term Dow

In the medium term, we covered Shorts in the market at 10,850 today, giving us a solid 50 point gain. We then entered Longs at 11,000 and are still in the trade. We will want to hold stops at the entry and will look for additional Longs above 11,150. We will hold off on Shorts, unless 10,750 is crossed to the downside; using 20 point stops.

NASDAQ & S&P

The NASDAQ and S&P each broke out of clear consolidations today, but the tech-heavy index clearly lagged the broader market. Each index closed the day near the session highs, which is where we could see signs of a possible continuation pattern.

Summary

The Dow ended the day sharply higher after getting a major upside break from the tight consolidation today. The index closed the day at the session's highs and will likely build out a continuation pattern before another move is seen. Watch 11,150 for a serious upside continuation.

Thanks for listening, and Good luck in your trading!

Ed Downs
edowns@nirvsys.com

with assistance from..
Frank Ochoa, Sr. Market Analyst
fochoa@nirvsys.com

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