WallStreet: Support Hanging on Lower Line Of Bullish Channel After Pullback From High
The short term daily candle chart below shows the price history the WallStreet contract for difference (CFD) which is trading just around 17,037 around time of publication today ahead of the market open in New York this Wednesday.
The WallStreet CFD aims to track the underlying Dow Jones Industrial Average (DJIA) index which has corrected since its recent all-time high under 17,360 on September 19th and as described in the last post about this CFD index in the Ideas You Can Trade series.
That correction has brought prices towards the lower support line of the medium term bullish channel that has been the focal point of the trend for most of this year.
If this support line fails we can see a large correction such as the one that started in August after the July 31st break-below this same support line. If that happens again, then support could be retested near 16,260 or nearly 1000 points lower.
If however the bullish momentum of the medium term can keep WallStreet above the support line that it's barely hanging on to - then it may avert a more serious correction than it has already experienced from recent highs. On the upside resistance still exists near that high which may be retested if a bullish continuation follows.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 17,151 with a Limit to take profit @ 17,288 and a stop-loss @ 17,024 Risk/Reward Summary: Limit risk = +137 points profit / (-127) Stop-loss risk = Gain to Loss ratio = 1.07
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 16,983 with a Limit to take profit @ 16,843 and a stop-loss @ 17,113 Risk/Reward Summary: Limit risk = +140 points profit / (-130) Stop-loss risk = Gain to Loss Ratio = 1.07
Short term chart (daily candles):
A note on CFD’s: A Contract for Difference, or CFD, is a financial contract allowing traders to potentially profit whether markets move up or down and include risk of loss. CFDs are cash-settled based on the difference in the value of an underlying asset from the time a trade is opened to the time the position is closed. A list of available CFDs that can be traded with WorldWideMarkets.com (WWM) can be found on the WWM website.
In addition to CFDs, WWM - through a third-party - offers direct access to non-US residents to trade exchange trade equities on the US Stock Markets, with more information also available via the WWM homepage.