Dow Jones Industrial Index price testing support and oversold territory

Dow Jones Industrial Index (Wall Street 30)

The Dow Jones Industrial Index (Wall Street 30) is undergoing a minor correction from the recent move higher and what was overbought territory.

While the price is trading back below the 20-day simple moving average (red line) (20MA), the 50MA (green line) and 200MA (blue line) have recently crossed. This suggests that the medium to longer term trend bias is up.

In turn we consider the near term move lower to be a short-term correction of what could be the start of a longer-term uptrend.

The price is currently testing support at 33485. In line with the longer-term uptrend bias assumed, traders might consider looking for long entry on confirmation that the short-term correction has ended and is again aligning with the longer-term uptrend. Confirmation of this would be assumed on a bullish price / candlestick reversal around the 33485 or 33170 support levels. Further confirmation might be assumed on a quick move in and out of oversold territory by the stochastic oscillator.

In this scenario, a close below the reversal low could be used as a stop loss indication while targeting a move back towards resistance at 34290. Should the price mange to close above this level, traders might consider moving their initial stop loss to their initial entry level while in search of further gains towards the 35580-resistance level.

Client Sentiment

As of the 7th of December 2022, 63% of IG clients with open positions on the Wall Street 30 Index expect the price to fall in the near term, while 37% of IG clients with open positions on the index expect the price to rise.

The IG client sentiment indicators highlight a near-term retail traders view on the index rather than an institutional view. Often retail sentiment is interpreted as a contrarian to longer term price trends which appears to be the case right now.

In summary

• The Dow Jones Industrial Index (Wall Street 30) has corrected from recent highs and overbought territory to a tentative level of support
• Near term support levels are considered at 33485 and 33170 respectively
• The stochastic oscillator is moving to test oversold levels
• The 50MA having recently crossed above the 200MA suggests the medium to longer term trend bias to be up
• Trend followers might look for confirmation that the short-term correction has ended, and the longer-term uptrend is resuming before looking for long entry
• Upside resistance targets are considered at 34290 and 35580 respectively
• The majority of IG clients with open positions on the Wall Street 30 Index expect the price to fall (as of the 7th of December 2022)