Now that the Dow Jones ($DJI) got the breakout from the narrow price range we forecasted in our Monday analysis, here’s how we’ll be playing a potential down move Wednesday.
The Breakout
In Monday’s analysis titled Watch the Dow for a Breakout, I wrote that price was coiling for a potential breakout opportunity that could spark the next short term move.
As it turns out, the Dow got a solid downside break through the bottom of the 7-day range at 13,500, which paved the way to a 101-point loss on the day.
The downside break indicates price could be headed to the 13,320 bear target I forecasted in my analysis within 3 to 5 days.
Today’s Outside Day candlestick pattern further confirms weakness ahead.
Lower Value
Today’s downside move, combined with the potential for more downtrending behavior ahead, opens the door to one of my favorite setups – the Lower Value setup.
The 15-minute chart shows the Dow has formed a 2-day Lower Value relationship using the Pivot Range indicator.
The Lower Value relationship develops when the upcoming day’s pivot range forms completely lower than the prior day’s pivot range. In essence, this relationship indicates continued weakness ahead, especially if Wednesday’s Open price confirms the setup.
This is the kind of setup that you can play over and over during a well-behaved trending market.
The Game Plan
If you missed today’s move, here’s how you can approach tomorrow’s market to grab a piece of the action.
Since we have a Lower Value relationship, I’ll be looking to sell into any modest strength tomorrow morning, with the intention of riding price to new lows within the current near-term decline, especially if price remains beneath the support-turned-resistance level of 13,520.
If price opens the session below 13,480, look to sell into strength between 13,485 and 13,515. However, if price opens the session above 13,500, look to sell into strength between 13,515 and 13, 540. Look to scale out of your position at the following targets: 13,465, 13,405, and 13,355.
If the $DJI opens the session above 13,540, then market sentiment has clearly shifted and likely means strength ahead. Keep this contingency in mind.
Let’s see how this plays out!
Cheers!
Frank Ochoa
PivotBoss | Own the Market
Follow us on Twitter: http://twitter.com/PivotBoss
[cc_h_line color=”888888″]
[cc_list_posts post_type=”post” amount=”3″ img_position=”left”]
Frank
great to see these current market comments on Dow …when are going to have the daily comments up & running
kind regards
John
One of my rules is never buy R2 or short S2, on intraday, weekly, monthly or yearly pivot points. Price closing above or below a number “2” pivot point(r2 or s2) only happens approx 18% of the time. Better to short R2. 82% odds / chance of being a winner. How would you like those odds in Vegas?
Exactly! Great rule, Jeff. Playing pivots is all about probabilities…and the stats say that price stays within R2/S2 most of the time.
I’d like to get back to posting more frequently again…I enjoy it. I’m also looking at adding a subscription service that expands on PB analysis. If there’s something that you’d like to see, give me your thoughts!