Sunday, April 20, 2008
Are You Still Short?
(Click to enlarge chart)
The Dow Jones Industrial Index broke out of a large head and shoulders bottom formation on Friday. The measured height of the pattern from the bottom to the neckline is 1018.86 points. The first target is .50*1018.86+12720.56=13230.00. The second target is 1.0*1018.86+12720.56=13739.42. 12720.56 is the breakout point on the neckline as of Friday.
The 50% retracement to the October 2007 high is 12916.46, and the 62% retracement is 13218.93. Friday's high fell just short of the 50% retracement, and failed to breakout above the downtrend line from the October and December highs. The Dow also closed above resistance at the November 2007 low. 13230 is a highly probable target. 13739.42 may not be reached, but 13500 is certainly within reach. A pullback to test the neckline is a good bet.
All systems on the System Tracker are long. This rally may move in fits and starts but with so many long signals firing off, I would be surprised to see it end next week. Nevertheless, price rules over opinions. Trade the price.
May you be successful in your trading efforts this week.
Posted by R. Craig Pritchard at 9:00 PM