The current position on the indices has not been easy for traders as of recent.
Last Friday’s late afternoon 250 point rally certainly caught many traders of guard and this is the type of market action that traders have to get used to. Especially as we start to see sudden news related stories to the late credit crisis. So how can one capitalize on the moves?
At present we know that the market is in a consolidation phase. After falling to a low of 11634 we have noticed that the rally to the upside has been weak and on lower than normal volumes. This suggests that we should be prepared for increased volatility and also sharp moves in both directions to the upside and downside.
Until we can see a clear break from the recent channel, the upside resistance comes in at 12707 which if broken may see the Dow Jones rally higher towards 12960. If on the other hand we see a break below 12150, then a retest of the January low may occur very quickly.
Currently the Dow is trading above its 20 day Moving Average but momentum indicators have not so far reached a buy zone. We would need to see a continuation to the upside and higher closes for the charts to turn intermediate term bullish.
As we approach the end of the month, we could see upside targets being reached but with caution as March is known to see weakness set in.
Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.