Pushing to 27,000
“…we could see a downward move begin here, but because of the gap up Monday, this isn’t that likely..” The bullishness indicated by the gap did indeed continue through the consolidation and up towards the upper boundary of the channel at 27,000. The upward sloping channel from 26,700 to 26,800 is operable going into Wednesday – strong above, weak below.
I have marked the Consolidation target at 28,000 in the Daily Chart, which should materialize if the current range (26,000 to 27,000) is broken to the upside. This is now possible because the range we are in is solidifying, making it a much clearer Consolidation. These patterns are known as “continuation” patterns, and the target is suggested by the distance from the center of the range to the starting point, indicated by dotted lines. The projected target is twice the distance.
DJIA – Daily
We now have a nice 100 point range to work off – the sloping consolidation from 26,700 to 26,800 on the right edge. I would expect a pull-back tomorrow to the lower line, and then a renewed push upward. A break of 26,700 down would be negative, short term.
As bullish as today looked, we will have to see how the market digests current news. It looks like a run to 27,000 is in the offing. And right now, that’s the way to bet. But don’t be surprised if the lower channel boundary at 26,700 is broken – and look to play weak candidates short if that occurs Wednesday. We still haven’t seen any explosive moves yet, but Wednesday could be the day the fireworks begin.