This blog is committed to the serious study and valid understanding of technical analysis and its objective application to stock selection, risk management and execution primarily in the context of trading stocks listed in the Philippine Stock Exchange (PSE).

Sunday, March 23, 2008

DJIA POTENTIAL AREAS OF SUPPORT

Looking at the 10 year monthly chart, we come up with the following potential technical support levels. We notice that 3 out of 6 or 50% of the results are in the 11,500-11,600 range, meaning that not a few buyers in the sidelines will be looking at that area of the chart with great attention. We should take it to mean that at those levels, sufficient buying interest could materialize to overwhelm selling pressure - enough to halt a decline, change the direction of the index to start a correction rally or even usher the onset of a bottoming process from where a reversal may be launched.

1. Prior reaction low * 11,600 * Jan-2007
2. Prior reaction high * 11,500 * 3Q-1999 * broken 1H-2006 (possible role reversal)
3. Trendline support * 12,000 * Mar-2008
4. Fibonacci retracement levels based on the Dow's 6,339 pt advance from 7,591(2002) to 13,930 (2007) * (a) 38.2% - 11,500, (b) 50.0% - 10,760, (c) 61.8% - 9,472

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