Dow Jones Industrial Average Bumps Up Against 70-Year Resistance

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February 23, 2018 6:20am INDEXDJX:.DJI NYSE:DIA

From Chris Kimble: Back in November, I shared a long-term historical chart of the Dow Jones Industrial Average and pointed out a megaphone pattern breakout that looked bullish for stocks.


After that post, the Dow Industrials rose over 3000 points heading into January before embarking on a long overdue correction.

So what now?  Let’s take a look at an updated chart (see below)…

The Dow has spent the majority of the past 70 years inside parallel channels (points A, B, and C). And as you can see below, the Dow’s latest breakout above a megaphone pattern (point 3) has lead to a test of the upper channel (point 4). This is acting as resistance right now.

Look familiar?  It should.  This same pattern took shape during the last megaphone breakout (point 1).  That breakout lead to a test of the overhead parallel channel (point 2) in 1987.  That channel acted as (rising) price resistance until 1995, when it broke out once more and went on to test the upper channel boundary.

If this is any indication, it’s understandable why stocks are stumbling a bit here (at first pass). BUT, if they follow the same pattern, they may continue to test this rising channel resistance:

dow-jones-industrial-megaphone-price-pattern-chart-long-term-technical-analysis

The SPDR Dow Jones Industrial Average ETF (DIA) rose $1.81 (+0.73%) in premarket trading Friday. Year-to-date, DIA has gained 0.85%, versus a 1.33% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 79 ETFs in the Large Cap Value ETFs category.


This article is brought to you courtesy of Kimble Charting Solutions.


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