WallStreet: Starting Off Year Lower as Third Pullback Since Last October Already Underway
The short term daily candle chart below shows the price history of the WallStreet contract for difference (CFD) which aims to track the underlying Dow Jones Industrial Average (DJIA) index. Today WallStreet is trading just around 17585, and making new Year-To-Date (YTD) lows for 2015.
Last time WallStreet was reviewed in Ideas You Can Trade, earlier last month, the index had missed 18000 and then started to pullback (for the second time since October). That bearish continuation proceeded until support on a newly developed medium term trend line (drawn from October's low - and now evident) was reached near 17000.
Since then WallStreet recovered and finished 2014 strong reaching a new high after Christmas. However, after failing to hold above 18000 the bearish momentum has returned with a third pullback already underway.
On the downside that same support line that reversed the last pullback (point 5 in aqua color on chart below) could enable a recovery near 17500 in the next few days. On the upside WallStreet doesn't appear too bullish in the very short term and needs to end a session higher as it's almost on its seventh consecutive trading day lower - thus looking quite bearish.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 17883 with a Limit to take profit @ 17992 and a stop-loss @ 17788 Risk/Reward Summary: Limit risk = +109 points profit / (-95) Stop-loss risk = Gain to Loss ratio =1.14
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 17551 with a Limit to take profit @ 17435 and a stop-loss @ 17679 Risk/Reward Summary: Limit risk = +116 points profit / (-128) Stop-loss risk = Gain to Loss Ratio = 0.90
Short term chart (daily candles):