WallStreet: Index Regains Multitude of Support Lines as December All-Time-High Is Within Range Again
The short term daily candle chart below shows the price history of the WallStreet contract for difference (CFD) which aims to track the underlying Dow Jones Industrial Average (DJIA) index. Today WallStreet is trading near 17900 around time of publication and opened higher for the 3rd straight day.
In the last post about WallStreet in Ideas You Can Trade, a pullback was underway and subsequently unfolded at the start of 2015.
Since recovering off support reached near 17000 on the second day of this month, WallStreet has climbed up a steep bullish trend line - consistent with prior such reversals (see point 4 on chart below in aqua color). While that line may have been exited in the last few days, support on higher line (bullish channel in yellow) had already been regained and has since helped lift prices towards current levels.
In addition, as the index has been trading within a range since the end of last year, the all time high reached on December 26th 2014 is now within close range again, and likely the next upside target if the bullish momentum continues.
If support fails around current levels, a number of support lines still exist near 17500, also if the resistance near 18000-18100 isn't surpassed then a sharp reversal should follow.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 17962 with a Limit to take profit @ 18099 and a stop-loss @ 17862 Risk/Reward Summary: Limit risk = 137 points profit / (-100) Stop-loss risk = Gain to Loss ratio =1.37
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 17751 with a Limit to take profit @ 17616 and a stop-loss @ 17861 Risk/Reward Summary: Limit risk = 135 points profit / (-110) Stop-loss risk = Gain to Loss Ratio = 1.22
Short term chart (daily candles):