Stock Market Analysis

Tuesday, April 03, 2007

Dow Rises Along "Secret Bullish Channel"...

Remember the Dow's "Secret Bullish Channel" that I mentioned yesterday? If not, here's a quick recap...

"Looking at the daily charts, the Dow seems to be secretly forming a bullish channel. The probability of a Dow rebound remains high as indicated by a strong 30MA support on the weekly chart.... if we see a strong positive day tomorrow, then this secret channel may well be real and we might indeed be in for another positive April."

The Dow broke marginally above its 12500 resistance level on an extremely impressive 128 points gain in a day, however, the question is, does this constitute a "Strong Positive Day"? I still have my reservations even at this critical point in time as volume remains weak, suggesting that this gain may be due to a few institutional bargain hunting instead of mass concensus. When the mass jump in, we should see volume above the 30days average volume. At least that's my personal take. The Nasdaq composite is also just a short distance from its 2455 resistance level and with its short term stochastics just slightly below overbought, it may muster enough energy to make a break tomorrow.

This is indeed a technically challenging scenario where it has become difficult to put a finger on where the market might head. On one hand, we have the Dow following a nice Secret Bullish Channel upwards, supported by a strong weekly chart but on the other hand, we continue to see a weak level of participation on very big up days like today which makes the whole move a little suspicious. If the Dow should regain its bull trend from here, the next level of resistance would be around the 12745 region.

Based on the trend so far, I see a developing bull trend started by the dragon tail formation that I mentioned on 14 March 07. I just need further convincing before taking definite action. For now, I go balanced long short.

(There will be no fundamental analysis today due to the long technical analysis that I have wrote, however, it can be noted that this market rally could also be contributed to the sudden series of drops in oil prices as the situation with Iran over the captured British soldiers lightened up.)

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