Dow Jones Head and Shoulders Points to a Reversal

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Written By: Mircea Vasiu
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    Summary:
  • Dow Jones head and shoulders pattern points to a break lower. The NFP report last Friday failed to trigger a bearish move, but that may change this week.

The Dow Jones ended the previous trading week on a high note. Despite the NFP report showing that the jobs market lost 140k jobs in December, the Dow rallied in the last hours to end the week close to record highs. In the meantime, the futures corrected, and the hourly chart shows a potential head and shoulders pattern.

At this point, the stock market seems decoupled from reality. Not even the Capitol riot was not enough to scare investors.

The reason for the higher stock market prices comes from the Americans investing part of the stimulus instead of spending it. Studies showed that most of the financial help received by those earning less than $75,000 a year was spent on securities trading, thus justifying the higher stock market prices. If the same happens to the current stimulus, we should not be surprised to see even higher prices in the future.

Dow Jones Technical Analysis

While the pattern below is on the hourly chart, it does have the potential of showing a sharp market reversal. Bears may want to wait for the price to break below the neckline before going short with a stop loss at the highs and a take profit at the measured move (i.e., the target suggested by the orange line).

Dow Jones Price Forecast

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.

Published by
Written By: Mircea Vasiu