Dow Jones heads into resistance zone...

By Sandy Jadeja 14:08 2- Mar -2010

With a surprise to the bears the bulls have managed to continue back into the resistance zone after a brief decline.

The recent price action almost had the bears in control of a potential decline but a turnaround saw the index quickly revert back into bullish mode. We have seen the Dow Jones trading into the 10400 area which is above the initial resistance of 10388. If we see the index hold this level then chances are we may be looking at overhead resistance of 10538.

What is interesting is that the momentum index had already provided a bullish signal two weeks ago along with the index holding above the Moving Average. This had provided an early clue to the bears that the drop may not be as severe as expected.

Currently if we see the index trade back above 10438 then the target would be 10538 before we see further technical resistance come into play. The possibility of a bearish head and shoulder pattern still exists at this price zone and therefore the major resistance is still the high of 10729.

As long as technical indicators remain bullish the head and shoulder pattern would need a strong thrust to the downside to turn this market around into the bears hands.

For the week ahead we would need to hold above 10100 – 10140 otherwise that would signal a high could be in place and a decline may be ahead for the month of March. More than likely we may see a sideways trend in the current price zone and hence choppy price action with no major direction until we break above 10538 or below 10100 to indicate the next major price move.

Sandy Jadeja is Chief Market Strategist and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.