Dow Jones Clears 50% Fibonacci Level

The Dow Jones Industrial Average(DJI) closed today at $24,633 with a gain of $523(+2.2%) which came as the Federal Reserve held their third FOMC meeting of the year and left interest rates near 0%. Price now has three closes above the 50% Fibonacci retracement level which is bullish and places price back in the upper half of the total Fib range from the February highs(100% Fib) to the coronavirus selloff low in March(0% Fib level). Price has also crossed above the dashed blue line which was the previous stop-loss level on the short-trade in the expected move to down to test the selloff lows which failed to materialize. With price now making new local highs above the 50% Fibonacci level and above my previous short trade stop-loss level I am no longer in the short trade and was stopped out on yesterday’s move higher. While the current trend indicates a bullish bias, price still needs to make a move above the 61.8% Fibonacci level as a sign of uptrend continuation.

I’ve redrawn the lower line of the rising wedge pattern and moved it a little lower than where it was in previous charts shared and am now watching the structure of the new rising wedge pattern. The dashed orange line represents the previous lower line of the wedge pattern for reference.

Since price has now made new local highs above the blue dashed line(previous short trade stop-loss level) a new long trade can be entered here with the solid blue line as the new stop-loss level, which is roughly -6% below current price. This stop-loss level is placed at the last base, or level of demand, in price prior to new highs being made. With a series of higher highs and higher lows the short-term trend is now bullish, as is momentum based on the series of green price candles over the past three days which indicates bullish momentum behind price with my candle color algorithm.

The Relative Strength Index(RSI) shows the green RSI line now above the 60 level which indicates a strong bullish momentum trend. In general, an RSI reading above 50 indicates short-term bullish price momentum while a reading below 50 indicates short-term bearish price momentum. The purple RSI signal line also continues to rise which indicates bullish momentum in the intermediate-term as well.

The Price Percent Oscillator(PPO) shows the green PPO line and purple signal line both rising above the 0 level. A PPO reading above 0 indicates bullish price momentum while a PPO reading below 0 indicates bearish price momentum.

Overall, the trend and momentum behind price are now bullish enough for me to switch from being neutral on the market to bullish in the short-term. While price and the lower momentum indicators are now pointing toward higher prices going forward, I’m still going to keep an eye on the rising wedge pattern that is in play, as well as potential resistance at the 61.8% Fibonacci level, but for now the chart is saying “bullish”. This week marks the end of April so I’ll be sharing some month-end closing charts this weekend as well as more detailed analysis of the market along with some fundamentals.