Short term price breakouts on the SP500 Nasdaq and Dow indices
In this article we take a technical analysis trading view of recent price breakouts on major US indices, the S&P500, Nasdaq100 and Dow Jones Industrial Average.
Major US Indices, the S&P500, Dow Jones Industrial and Nasdaq have started to rebound from short term weakness. In this article we look at what technical trading opportunities these moves may be presenting.
The below daily charts all make use of the following technical indicators:
Red line: 20 day simple moving average (20MA)
Green Line: 50 day simple moving average (50MA)
Blue line: 200 day simple moving average (200MA)
Lower indicator window: Stochastic (14,3,3)
The S&P500 (US 500)
The S&P 500 long term uptrend remains firmly intact. After a short to medium term correction of this uptrend, we are now seeing a resumption of short term gains. This is highlighted by the price reversal off the 4275 low and subsequent rally which has broken the 4475 resistance level.
The 20MA has not yet crossed above the 50MA, although the price is now trading firmly above both these averages. The index currently trades in overbought territory. We have also seen the price breaking out of a falling wedge (dotted lines) formation to highlight the resumption of the longer term uptrend.
4550 (recent high) and 4700 (trend line projection) provide longer term upside targets for the index.
Our preference is to look for a pullback from overbought territory, towards upper wedge support, for long entry before targeting the aforementioned upside resistance targets (4550 and 4700 respectively).
Only on a move below the 4275 support level and 200MA would we look to reassess our long bias to trades on the S&P 500
Dow Jones (Wall Street)
The Wall Street Index chart mimics that of the S&P 500 i.e. the long term uptrend remains firmly intact and after a short to medium term correction of this uptrend, we are now seeing a resumption of short term gains. This is highlighted by the price reversal off the 33530 low and subsequent rally which has broken the 34870 resistance level.
The 20MA has not yet crossed above the 50MA, although the price is now trading above both these averages. The index currently trades in overbought territory. We have also seen the price breaking out of a falling wedge (dotted lines) formation to highlight the resumption of the longer term uptrend.
35500 (recent high) and 37700 (trend line projection) provide longer term upside targets for the index.
Our preference is to look for a pullback from overbought territory, towards upper wedge support, for long entry before targeting the aforementioned upside resistance targets (35500 and 37700 respectively).
Only on a move below the 33530 support level and 200MA would we look to reassess our long bias to trades on the Wall Street Index.
Nasdaq (US Tech)
The Nasdaq100 index long term uptrend also remains firmly intact and after a short to medium term correction of this uptrend. The price reversal off the 14390 low has brought the price back to the 15400 resistance level.
The 20MA has not yet crossed above the 50MA, although the price is now trading above both these averages. The index currently trades in overbought territory. We have also seen the price breaking out of a bullish flag (shaded channel) formation to highlight the resumption of the longer term uptrend.
15715 (recent high) and 16250 (trend line projection) provide longer term upside targets for the index.
Our preference is to look for a pullback from overbought territory, towards upper flag support, for long entry before targeting the aforementioned upside resistance targets (15715 and 16250 respectively).
Only on a move below the 14390 support level and 200MA would we look to reassess our long bias to trades on the Nasdaq100 Index.
In summary:
- The long term trends for the S&P500, Dow Jones and Nasdaq Indices remain up
- These indices have rebounded after a short to medium term correction to break out of wedge (S&P500 and Dow) and flag (formations)
- Recent gains in major US indices have however moved these indices into overbought territory
- Our preference is to look for long entry into these indices on a pullback from overbought territory
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. 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. See full non-independent research disclaimer and quarterly summary.
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