Spread Betting Opportunities
Monday 17 March, 2008
This edition of Spread Betting Opportunities maps the path for the Dow Jones Industrial Average in the sessions ahead.
Short term outlook for the Dow
Last week was a particularly volatile one for equity indices. The Dow moved within a range of 11731.60—12303.35, spanning over 571 points during the week. However, the net move was a gain of 57.4 points for the week.
The chart of the Dow as at the close on Friday 14, March is presented below:
The evidence from last week’s trading sessions presents a number of bullish and bearish arguments that we need to weigh in order to form a view on the potential path of prices in the week ahead. Firstly, the fact that the index had a second consecutive close below that major resistance band between 12180 and 12200 was bearish (note that the area acted as price support for a while before it was broken in early March). After the initial breakdown, an attempt to regain that level failed at resistance on Wednesday, resulting in the move lower into the close on Friday. Moreover, viewed in the context of the wide trading range, the close at 11951.09 was not far off the week’s low, suggesting ongoing bearish momentum in the index.
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Despite all these, there are a number of reasons why conservative traders in short positions should keep a watchful eye on stop-loss levels in the second part of the coming week. While we’re not exactly there yet, another two to three trading sessions should take the index into heavily oversold levels from where a strong bounce could occur.
Overall, the evidence suggests that the Dow should move lower towards 11730 early in the week. In the event of such a move, a bounce would be highly likely from around 11650—11730.
Detailed analysis for the FTSE100, Cable and Crude Oil are also presented in the latest edition of the Market Timing Update. Make sure you check it out!
Key short term support levels to watch for: 11820–11780; 11730; 11650
Key short term resistance levels to watch for: 12075–12100; 12200; 12270
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