Following up on the previous post on “Why US market Dow Jones didn’t manage to fall and why it might fall”, price has now broken the key support level of 10,593.
Dow Index reacts to resistance
We noticed that recently price has been ranging in the highlighted red zone since 3rd August 2010 to 10th August 2010. Thus, this would give us a hint on the strength for Dow Jones if the support level 10,593 doesn’t hold.
Yesterday, on 11th August 2010, the Dow Jones fell 265 points and price has now broken down the uptrend channel in green, which also gives us a clue to prepare for short upon retracement.
However, price seems to be holding at the support level 10,347 to 10,407 as highlighted in the blue zone above thus, seems to suggest that it might be risky to go short now without any retracement as this would also means ‘shorting on support’.
Therefore, if the Dow Jones manage to hold the highlighted blue zone support level, then one of the way would be to go down to lower timeframe (i.e. hourly chart) to wait for a setup upon retracement and if possible as near to the 10,593 level where previous support turns into resistance and also a ‘potential head & shoulder’ chart pattern, so that the risk would then be minimized.
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