Technical Analysis DJI : 2019-06-07

Positive US data bullish for DJI

Services sector in US accelerated more than expected as manufacturing sector continued expanding in May. Will the DJI stock index continue advancing?

US data lately were positive on balance: expansion in services sector accelerated more than expected as manufacturing sector continued expanding (albeit at slower than forecast pace) in May. At the same time vehicles sales increased more than forecast in May. These reports were preceded by a Census Bureau report of a stagnant core factory orders (which exclude volatile aircraft orders) in April. And market sentiment was buoyed by Federal Reserve chair Powell’s comment the central bank will ‘ act as appropriate to sustain the expansion’ . At the same time Federal Reserve released its beige book for April through mid-May, which described the U.S. economy as expanding at a “modest pace overall .” Continuing economic growth is bullish for US equities market.

DJI returns above MA(200)  06/07/2019 Technical Analysis IFC Markets chart

On the daily timeframe DJI: D1 is rising after failing to close below Fibonacci 38.2 level. It has returned above the 200-day moving average MA(200). These are bullish developments.

  • The Donchian channel indicates uptrend: it is widening up.
  • The Parabolic indicator has formed a buy signal.
  • The MACD indicator is below the signal line and the gap is narrowing, which is a bullish signal.
  • The RSI oscillator is rising but has not reached the overbought zone.

We believe the bullish momentum will continue as the price breaches above the upper boundary of Donchian channel at 25795.10. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below the lower Donchian boundary at 24598.60. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (24598.60) without reaching the order (25795.10), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

PositionBuy
Buy stopAbove 25795.1
Stop lossBelow 24598.6

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