Professor’s Comments February 24, 2016
Posted by OMS at February 24th, 2016
The Dow gave back 189 points of the 229 points it gained Monday, closing at 16,432. Volume was low on the decline, coming in at 85 percent of its 10-day average. A low volume decline after the run up since 11 February is Bullish. There were 41 new highs and 26 new lows.
Not much changed after yesterday’ trading action. Yesterday’s pullback was expected. It appeared to be the start of a small corrective pattern which should continue for the next day or so before the final waves toward 17,000 begin.
The extend of the pullback and the shape of the pattern will determine the eventual high for Major Wave 2 up.
Right now, there are two likely scenarios for how the corrective wave structure should develop.
If prices remain within 50 points of yesterday’s low, it’s likely the Dow will form a sideways triangle. Any type of consolidation triangle should form near current levels and take about a week to develop as prices trace out the five required waves.
If prices drop more than 50 points from yesterday’s low and approach the 16,300 level, then it’s likely the pattern will morph into an Ending Diagonal. The Ending Diagonal will also have five waves, but the pullback to 16,300 will be wave 2 of the Ending Diagonal instead of a wave 4 triangle.
At this point I have to give the Ending Diagonal scenario slightly more weight as it would make more sense given that the Dow appears to be completing a Major Wave 2 up. Ending Diagonals are termination patterns and often seen at the end of Major correction waves, like a Major Wave 2 up.
So IF the Dow pulls back to the 16,300 level, I would view it as a potential opportunity to buy a few DDMs for a move toward 17,000. This would be a position trade as I will be holding the DDMs overnight.
That’s what I’m doing,
h
Market Signals for
02-24-2016
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments