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Key Takeaways
- The Dow Jones Industrial Average added 0.5% on Monday to post a record close at 40,211.72, with gains driven by components within the financials sector.
- The index broke out from an ascending triangle, a chart pattern that indicates a continuation of the uptrend.
- The measuring principle projects a shorter-term price target of 43,500, while a bars pattern forecasts a longer-term price target of around 46,615.
- During retracements, the DJIA may find support near the ascending triangle’s upper and lower trendlines at 40,000 and 39,300, respectively.
The Dow Jones Industrial Average (DJI) added 0.5% on Monday to post a record close at 40,211.72, the blue-chip index’s first new all-time high (ATH) since May 17 and its 20th record close this year. Financials, which command a 22% weighting within the index, helped power gains yesterday.
Below, we take a closer look the index’s chart and use technical analysis to point out important trading levels to watch.
Breakout From Ascending Triangle
The DJIA trended sharply higher between October 2023 and March this year before consolidating within an ascending triangle This pattern, which consists of a horizontal line connecting a series of swing highs and a rising trendline that links at least two swings lows, indicates a continuation of the index’s longer-term uptrend.
Indeed, the price broke above the pattern’s top trendline on Monday in a move that could see the index continue its climb higher throughout earnings season.
Monitor These Key Price Targets Amid Further Upside
To forecast a shorter-term potential price target, we can use the measuring principle, sometimes called the measured move technique. We do this by calculating the distance near the start of the ascending triangle in points and add that amount to the pattern’s top trendline.Â
Therefore, we add 3,500 to 40,000, which predicts a target of 43,500. This provides a general area where the chart may face selling pressure, especially if other technical indicators point to overbought conditions in the index at the same time.
We can project a longer-term price target by using a bars pattern. This involves taking a snapshot of the uptrend that preceded the ascending triangle and applying it to the May swing low, which guides a general target of around 46,615.
Keep These Levels in Mind During Retracements
Despite the bullish technicals, short-term retracements remain a possibility, especially with the relative strength index (RSI) flashing an elevated reading above the closely-watched 70 threshold. During periods of profit taking, investors should monitor two key levels.
Firstly, keep an eye on the 40,000 area, a region where the index would likely attract buyers near the ascending triangle’s top trendline and the psychological round number.
Secondly, it’s also worth watching the 39,300 area, where the index’s price currently finds a confluence of support from the pattern’s lower trendline and rising 50-week moving average (MA).
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As of the date this article was written, the author does not own any of the above securities.