Dow Jones Bullish Pennant Formation Hints to More Strength

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Written By: Mircea Vasiu

May 06, 2021, 08:51 BST 08:51

Dow Jones

Summary:

Dow Jones breaks out of a pennant formation and now threatens to move even higher. Bulls have a case here, but money management is key.

The Dow Jones index is back at all-time highs after the market bounced strongly from the lower edge of a pennant formation. Pennants are bullish patterns, and the price action typically pierces the lower trendline before the bullish breakout. This is what happened with the Dow Jones index this week, as it dived below 34,000 before bouncing back at the highs.

Bulls may like what they are seeing because the measured move of the pattern indicates more strength ahead. With only one day left ahead of the NFP report for the month of April, the consensus is that the US economy added close to one million new jobs in the previous month.

However, some estimates indicate even more jobs created, so we may be in for a big, positive surprise. After all, if we look at the economic performance during the first quarter of the year, the 6.4% growth indicates a stronger labor market than many would have expected.

Dow Jones Technical Analysis

The technical picture is pretty clear – the price action broke out of a pennant formation and made a new all-time high. To trade it, bulls may want to go long at the market and target the measured move, but make sure to have a stop-loss order at the lowest point in the pennant formation.

Dow Jones Price Forecast

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Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.