Dow Pulls Back to Support After Bullish Break to Three-Week Highs
– After spending most of last week digesting a prior bearish trend, US stocks put in bullish breakouts after Non-Farm Payrolls and this helped the Dow Jones Industrial Average firm-up to fresh three-week highs. Prices found resistance at a key Fibonacci level and have since started to pullback, keeping the door open to bullish continuation strategies in the index.
– If the Dow Jones can take-out this three-week high, the door is open to a re-test of the 25,000 level that we last traded at in mid-June.
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Dow Drives to Three-Week Highs After NFP
The Dow Jones Industrial Average caught a bid after last week’s Non-Farm Payrolls report, and that strength lasted into the early part of this week as the index firmed up to a fresh three-week high. We were previously tracking a digestion formation in the Dow after price action had continued to narrow as we traded into Q3. The bullish breakout began shortly after US markets opened on Friday after the release of June payroll numbers out of the US, and prices ran-up to the 23.6% retracement of the April to June major move before starting to pullback.
Dow Jones Four-Hour Price Chart: Bullish Breakout Finds Fibonacci Resistance
As we had written on Tuesday, traders would like want to wait for prices to digest at least some of this breakout before plotting continuation, and we had looked at two zones of interest for possible higher-low support. The 38.2% Fibonacci retracement of the April-June move is at 24,624, and that helped to catch last night’s low. A bit-higher at 24,730 we have a prior price action swing, and this is helping to furnish higher-low support after prices bounced from the 38.2% Fibonacci retracement. This keeps the door open for bullish continuation with targets cast towards the 23.6% retracement at 24,921, with the possibility of secondary targets at the psychological level of 25,000.
Dow Jones Hourly Chart: 38.2% Fibonacci Support Produces Higher-Low
Chart prepared by James Stanley
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX