Is a 1,000 Point Move Brewing in the Dow?

The Dow Jones Industrial Average has experienced a wide range of price movement over the last two months of trading. However, the index now seems to be coiling up for a major breakout that could pave the way for a 1,000 point move. Here’s why..

The Triangle

The daily chart of the $DJI shows the index has built out the initial framework for a massive triangle – one that has a back end of 1,000 points. The back end is measured by taking the height of the triangle, from the highest peak to the lowest. This measurement gives you an estimate of how far price will travel, should a breakout occur.

Since the back end spans 1,000 points, we could see a move to 11,400 or 9,000, depending on which way the breakout occurs.

For a confirmed breakout from the triangle to be seen, we need to watch the 10,400 and 10,000 levels.

PEMA Breakout

For those of you that have downloaded my FREE eBook Profiting with Pivot-Based Moving Averages, you’ll notice the daily chart of the $DJI is also building out a PEMA Breakout setup.

The PEMA Breakout occurs when all three pivot-based moving averages are virtually flat – typically during a consolidating market.

This setup usually precedes a major breakout opportunity, which can be very powerful in higher timeframes.

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Outside Reversal

The daily chart of the $DJI also shows the index formed a bullish Outside Reversal pattern yesterday. This pattern occurs when the low of the current bar is lower than the low of the prior bar, and the close of the current bar is higher than the high of the prior bar.

This pattern is usually a highly confirmed reversal pattern and indicates we could see an upside break from the triangle.

However, continue to watch both the upper and lower boundaries of the pattern, as a breakout in either direction could spark a move of 1,000 points over the next two to three weeks.

Let’s see how this plays out!

Cheers!

Frank Ochoa
PivotBoss.com

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