DJ INDUSTRIAL – OVERBOUGHT
Trend: Short and medium term sideways. Long term up.
Strategy: Sell short the bounces. In April this year the Dow ran up into its 200-week moving average, which typically provides resistance (it also did so in Aug 2008, to the far left of the chart). A rally into early August this year appears to have petered out, short of its 200-week moving average. In addition, the weekly Stochastic Oscillator (on top) is overbought, which is typically a bearish set-up on a chart. Traders sell short on a bounce back to 10 450, on a sign of reversal down from there. Investors to reduce holdings in overseas stocks. Look for a drop to line 1 at 9600 in the months ahead. If the price breaks down and closes below line 1, it will set up further downside to 8700, for more shorting. Traders place your initial stop-loss for shorting as two consecutive daily closing prices above 10 800.