DJIA rallied strongly in 2023 and is reaching an almost historical high. This pullback is now being rejected from 35120 and we are seeing the consolidation below this level on a monthly chart. A break above this level is required for the upside extension.
The weekly DJIA chart shows a downtrend channel that can be defined as a bullish flag at this stage. The lack of a significant break above 34000 could open the door for a possible reversal lower and a test of 32000 which is a downside resistance. Now only a break above 34000 will invalidate the short-term downside, and a break below 33700 is required for a nice short trade in the coming week.
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As the famous trader says…
“The core problem, however, is the need to fit markets into a style of trading rather than finding ways to trade that fit with market behavior.”Â
Brett Steenbarger
How to trade this?
Obviously, for Q2 2023, we have this upside resistance of 35100 which should be broken higher for an upside continuation. This means that now short trade entries have some advantage over long trade entries as the overall long-term trend is still in a sideways range. You should open a short trade here first. The risk to reward on this trade is higher than 1 and the timing of the trade could be on Monday NY session with the stop loss above 105.60 to target the first 92 and if broken 80.
