DOW JONES – one more dip?

Finweek English Edition - - Creating wealth -

Trend: Short term side­ways to down. Long term up. Strat­egy: Only buy af­ter a fall to the 200-day mov­ing aver-

age. • The Dow re­cently bounced off its 38,2% Fi­bonacci re­trace­ment (line 2) of its rally from July 2006 to endFe­bru­ary 2007. It’s been con­sol­i­dat­ing over the past week and an­other drop is ex­pected be­fore a re­ver­sal up. • The sto­chas­tic os­cil­la­tor (on top) is cur­rently giv­ing a pos­i­tive di­ver­gence from its over­sold level. That’s a bullish sign and early warn­ing of a rally to come soon. Nev­er­the­less, the in­dex is still vul­ner­a­ble to one fi­nal drop be­fore the larger up­trend re­sumes. There­fore, wait be­fore buy­ing. Look for an up­ward re­ver­sal in price from its 200-day mov­ing av­er­age at the 11 850 level be­fore buy­ing. Fur­ther sup­port is line 3, the 50% Fi­bonacci re­trace­ment level at 11 750. An up­ward re­ver­sal from ei­ther level will be an op­por­tu­nity to buy (go long) the in­dex it­self (via the fu­tures mar­ket) or US blue chip stocks. • Then place your stop-loss as a break­ing of the low­est

point reached be­fore the up­ward re­ver­sal oc­curs.

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