Market Outlook

Now that the Dow has finally gotten a solid breakout from the 2-week trading range that we’ve been following, we’re likely to see more price discovery above. Here’s the target to watch for.

The daily chart of the Dow Jones Industrial Average ($DJI) shows price finally got a clear breakout from the 2-week trading range that we wrote about in this Report for Jan 17.

I mentioned that a move of about 500 points could be seen as a result of a breakout from this range. This could still happen, but the immediate target to watch for a test is 12,750, which is a little less than half the way to a 500-point target.

Notice that the Dow formed a highly bearish double top reversal at 12,750 last July. Testing this level will be important for the market, as the 12,750 to 12,875 zone is the only band of resistance standing between the Dow and 13,000.

Short term, we’d like to see the Dow continue to hold above 12,525. However, the 12,300 level is the more critical support level that needs to hold moving forward.

E-Mini Game Plan

The E-Mini Russell 2000 traded rather quietly Thursday after experiencing a slow, but steady advance during Wednesday’s market. This small range introduces the potential for some firework today, should a breakout occur.

The 15-minute chart shows the TF has gotten a significant break through the major 768 resistance level, which is a big deal. The 768 level in the TF translates to the 771 – 773 band of resistance in the $RUT, which we’ve discussed in the PivotBoss Report a few times already.

The fact that the TF has holding at highs above this major fulcrum is bullish. Even if the TF drops back to 768 for a retest, it should be seen as a buying opportunity.

The 15-minute chart also shows a very narrow value area for Friday’s market. Narrow value areas tend to indicate breakout or trending behavior. In essence, if the TF gets a solid breakout from Thursday’s range, we could see nice follow-through.

Look for a breakout from Thursday’s range to trigger entries: Long above 783, Short below 775.8. Bull targets are 786.8, 787.9, and 790.1. Bear targets are 771.9, 770.3, and 768.6.

Swing Trade Signals

Today’s Swing candidate is Johnson Controls, Inc. (JCI). This stock formed a highly bearish breakaway gap during Thursday’s market, and appears headed lower.

The daily chart shows price rallied from $28.32 to $35.95 in a straight shot over the last month of trading, but ran into a major area of resistance at $36, which was prior support dating back to Q4 of 2010.

The emphatic rejection at this level indicates a push toward the bottom of the developing channel pattern, which has developed over the last six months. Watch for a test of $30 ahead, especially if price remains beneath yesterday’s high price of $33.41.

Cheers!

Frank Ochoa
PivotBoss | Own the Market