DOW JONES – one more dip?
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.