Key Takeaways
- The Dow Jones Industrial Average will likely remain in focus on Friday after setting a new record high today above 42,000, gaining momentum after the Fed’s big half-point rate cut yesterday.
- The Index has moved higher after retesting the top trendline of an ascending triangle.
- A measured move, which uses the distance between the ascending triangle’s two trendlines near their widest points, projects an upside price target of 44,700.
- Investors should watch important pullback levels on the Dow’s chart at 39,900, 39,200, and 37,800.
Investors will likely watch how The Dow Jones Industrial Average (DJI) trades on Friday after the index posted a new record high today, closing above 42,000.
Like, its broader counterpart the S&P 500 (SPX), which also registered an all-time high (ATH) on Thursday, the 30-stock index continues to gain momentum following yesterday’s big half-point rate cut by the Federal Reserve.
After closing slighting lower on Wednesday in the aftermath of the Fed decision, the index bounced back sharply today. That may have be a result of market participants betting on the Fed remaining aggressive with interest rate cuts, potentially slashing the benchmark federal funds rate by another 75 basis points, as the central bank aims to manufacture a soft landing for the economy after a period of persistently high inflation.
Below, we’ll take a closer look at the Dow’s chart and point out important technical levels to watch out for.
Ascending Triangle’s Successful Retest
An ascending triangle formed on the Dow’s chart between July and September before the index staged a breakout above the pattern’s top trendline on Monday. In recent trading sessions, the index eased slightly to retest the initial breakout area before continuing its move higher on Thursday.
While the relative strength index (RSI) confirms bullish price momentum with a reading near the 70 overbought threshold, it also increases the possibility for pullbacks within the index’s longer-term uptrend.
Measured Move Upside Target For The Dow
To forecast a chart-based upside target, investors can use the measuring principle. To do this, we calculate the distance between the ascending triangle’s two trendlines near their widest point and add that amount to the breakout area. In this cae, we add 3,400 to 41,300, which projects a target of 44,700.
Key Pullback Levels to Watch
During periods of weakness, investors should monitor three key levels on the Dow’s chart that could come into focus.
The first sits around 39,900, a location below the ascending triangle’s lower trendline that may find support near several important peaks and troughs that formed on the chart between March and July.
The next lower level to watch lies at 39,200, an area that encounters a confluence of support from the upward sloping 200-day moving average and a horizontal line linking a range of comparable trading levels from February through to early August.
Finally, a breakdown below this level could see a larger decline to 37,800, an region on the chart likely to attract buying interest near a period of January consolidation, which corresponds with two closely aligns troughs in April and May.
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As of the date this article was written, the author does not own any of the above securities.