Technical analysis is most powerful when tracking the movements of individual stocks. There, I said it. And someone with as little experience as me should never attempt to predict what the broader markets are going to do. If I could do that well, I wouldn't have a day job. But the truth is that technical analysis works for measuring the "mood of the market" by looking at past performance to predict future behavior. If it can do that with individual stocks, it should have somewhat of an effect on broader indexes. So, here goes nothing:
The Dow Jones industrial average has recently hit an all-time high. On the backs of monetary policy, economic data, and trade chatter, the market has soared to places it has never been to before. Investors are thrilled, as they should be, but a close inspection of the price movement over the last two years indicate that the Dow is on a rising wedge pattern, which can be an indication of a bearish reversal in the near future.
Instead of boring you with my own interpretation of a wedge, I'll refer you to Investopedia's excellent explanation here. If the Dow Jones fails to break above the upper trend line, we could see a significant reversal of the current upward trend as the wedge approaches its convergence point. If that happens, the orange lines could indicate possible targets before we run into any support of significance. I'll be watching this one closely!
Do you want to learn how to do technical analysis? Consider these books (Amazon Affiliate link).
The Dow Jones industrial average has recently hit an all-time high. On the backs of monetary policy, economic data, and trade chatter, the market has soared to places it has never been to before. Investors are thrilled, as they should be, but a close inspection of the price movement over the last two years indicate that the Dow is on a rising wedge pattern, which can be an indication of a bearish reversal in the near future.
Instead of boring you with my own interpretation of a wedge, I'll refer you to Investopedia's excellent explanation here. If the Dow Jones fails to break above the upper trend line, we could see a significant reversal of the current upward trend as the wedge approaches its convergence point. If that happens, the orange lines could indicate possible targets before we run into any support of significance. I'll be watching this one closely!
Do you want to learn how to do technical analysis? Consider these books (Amazon Affiliate link).