Dow traders tempted to take profits

Price at time of writing – 15,761.

The recent surge has continued since my last update two weeks ago, taking the Dow another 191 points closer to my target level at 16,175. 

The index now resides just 414 points (or 2.6%) short of the resistance band that has been a feature in my updates for a very long time. Long-term holders of the index could be excused for jumping ship slightly short of this target, and leaving the last 2% to someone else. Strictly, however, the long recommendation remains intact until the target is fulfilled.

Today's Dow chart reverts to my alternative version, and highlights a line of resistance in a band defined as 15,590-15,647. In the bigger picture, I would describe this resistance as minor, and I have deliberately deleted it from my main working chart on the index. The current assault on this resistance is the fourth such attempt to break through since May this year, and early indications suggest intimidation is ebbing away. In a rising market, sideways churn around resistance such as this is mostly a positive sign, and a final burst up towards 16,175 remains the most likely course of events.

Time-angles on today's chart also show the pace of incline is slowing. Rising angles that emanate from lows in October 2011 and November 2012 were both penetrated last August, providing leading technical indicators that we are moving closer to a high of some importance.

Recommendation: stay long. Target 16,175, where profits should be booked and short positions opened.

Dow Jones chart

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This information has been prepared by IG, a trading name of IG Markets Limited 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.