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).

Friday, November 21, 2008

DJIA 11/20/08 MAJOR SUPPORT LEVEL GIVES WAY

PRICE AND VOLUME TURNOVER
Close 7,552.29 
Change -444.99 -5.56%
Volume 2.4B

TECHNICALS
* PRIMARY DOWNTREND
* INTERMEDIATE DOWNTREND
* SHORT TERM TREND BREAKS OUT OF 6-wk CONSOLIDATION AND RESUMES DECLINE
* SUPPORT 7368(Oct02) | RESISTANCE: Prior 9794 - Potential 7773/8500
* MACD Downtrending | Accelerating
* MA Downtrending | Steady
* Volume action during the range and today's spike confirms bearishness
* Price objective of the triangle formation 6500

MARKET OUTLOOK
The market lives up to the technical rules we pointed out in the last entry. While the index meandered between the 7773/9794 for the past 6 wks (a) the 2 larger trends remained declining, (b) the short term consolidation came off a prior downtrend, and (c) volume was expanding during the troughs. I said that taken together, they all point to a southward break. Today, the Dow exhibits a 2.8% penetrating close below the important support level of 7773. Retrospectively, it is now 11% below the 5wk triangle formation 4 days after the pattern trendline support gave way indicating a potential 2000 pt drop from 8500 for a price objective of 6500. The drop below 7773 ensures a lower low and the downward trend resumes in a big way. The unprecedented lows could trigger a new round of selling by hedge, mutual and pension funds and other traders whose trading strategy is to frontrun them. Notwithstanding any silver lining that optimists or bottom seekers can conjure up, the market obviously has not found a bottom for now. SELL.

NEWS
AP Stocks tumble for second day; Treasurys surge Thursday November 20, 6:12 pm ET
Stocks Plunge, Leaving Dow Below 7600 By Cindy Perman, CNBC.com | 20 Nov 2008 | 05:19 PM ET.
If Stocks Are So 'Cheap,' Why Are They Still Going Down? Posted Nov 20, 2008 12:01pm EST by Aaron Task

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