By Russell Glaser – The stock index just barely touched above its record high of 11,000 following the release of the Greek bailout package. The upward move for the index has not come from large one time gains, but from small increments of roughly 40 points on average. Traders may have the urge to pick a top at this point and go short, but better alternatives are available.
According to the daily chart, the bullish streak appears to be strong. The index has been consistently following a rising trend line since February, making contact numerous times along the way. The price is also trading above the 20 day moving average and the 50 day moving averages. We can also see the ADX 14 is floating at 43, level, indicating that the trend is strong. Typically we would like to see the ADX slanting upwards, but any reading above 40 is meaningful.
Now that the Dow has reached a new high, some traders may feel the need to go short as they believe the market has reached a new top. Before going short, traders may want to rethink. Trading against the trend can be dangerous. Traders looking to enter into this type of market may want to wait for a pullback to a Fibonacci retracement level before entering. The levels for the daily chart are listed below, but traders could also find a retracement using the hourly chart or the 4-hour chart to go long.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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