Today’s focus is on the Dow Jones, which experienced a sharp drop on Friday, marking a significant reversal in the American indices. Compared to its peers, the Dow Jones showed notable weakness, reflecting strong selling pressure as investors reassessed market sentiment.
Before this drop, the Dow Jones was moving within a pennant formation, marked in orange. This pennant pattern is typically a continuation pattern, but instead of breaking to the upside, the price escaped to the downside, confirming a bearish breakout. This breakdown has now shifted the focus to two critical support levels.
The first is the long-term blue uptrend line, connecting higher lows since the end of October, serving as a dynamic support level. The second is the lower red horizontal support, located around 41,800 points, which has historically acted as a strong demand zone.
Trading Scenarios:
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A break below both the blue uptrend line and the red horizontal support would generate a long-term sell signal, confirming a bearish trend reversal and opening the door to further downside movement.
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Conversely, as long as the price stays above these support levels, the long-term sentiment remains positive, despite Friday’s sharp drop.