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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Trade of the week: short Dow Jones

Inflation might creep back in to the US economy and push back rate cut expectations, and negative divergence accompanied the Dow’s Monday record high just below the psychological 40,000 mark.

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We would thus like to go short the index on a bounce back towards 39,700 with a stop loss at 40,100 and a downside target at 38,550.

(AI Video Summary)

Previous USD/JPY trading outcome

In this week's "Trade of the week" video, Axel Rudolph starts by discussing a trade that he made in the middle of March. He believed that the Japanese yen would weaken against the US dollar (USD/JPY) because he thought the Bank of Japan would shift its stance. However, he was surprised to see the yen continue to weaken, and even though he'd set a stop loss, the trade is still not doing well because the USD/JPY pair is trading sideways.

Previous GBP/USD trading outcome

Next, he talks about a trade he made last week where he bet that the British pound would weaken against the US dollar (GBP/USD). This trade is getting closer to his target, so he's thinking about adjusting his stop loss to make it a risk-free trade. He's also considering whether to take profits or wait for the price to hit a specific target.

This week's trading opportunity

Then, Rudolph introduces his risky trade of the week. He's noticed that the Dow Jones reached a new high near the psychological mark of 40,000. However, he believes that this could be a sign that the market is about to reverse and start going down. He mentions concerns about higher yields and inflation in the US economy. He also notse negative divergence in the Relative Strength Index, which often indicates that the market will correct in the opposite direction. Therefore, he suggests selling the Dow Jones when it bounces back to around 39,700, with a stop loss at 40,100 and a downside targel goal of 38,550.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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