Well, this is it folks. We've seen a spike top, a reversal and now, we can draw the neckline on the Dow Industrials and the S&P 500 index in case we need it.
We have to be aware that the market is potentially setting up a big break below the neckline that targets the January 13 swing low for the $INDU and $SPX. If this area cannot hold, then we're looking at the 50-day MA below as the second downside target.
Remember that as analysts we have to see both sides of the coin. What do we know about the January 13 swing low? We know that is where buyers came out before, so if the area between there and the neckline is tested and it holds, that means that the $INDU and $SPX are either building a bigger pattern, OR the entire pattern is morphing into some triangular congestion pattern.
The bottom line is that traders who are looking to exit DO NOT USE the breaking of the neckline to do it. We either get out on any potential right shoulder by trailing a sell stop below this small upswing OR we wait for the first pause under the neckline to position.
04.02.03 09:55 #