The Dow Jones Industrial Average opened lower this Friday as the coronavirus outbreak continues to spread to other countries. Downbeat earnings from Chevron also helped subdue investor sentiment.
The talking point of the week has been the coronavirus outbreak, which stifled any attempts by the Dow Jones to push towards new highs, even as the WHO went ahead to declare the epidemic as a health crisis of global concern.
Also, downbeat earnings from companies such as Chevron and Caterpillar hampered investor sentiment and caused further slide in the Dow, which is presently trading at 28662.
Chevron lost $3.51 per share as it lost $10.4 billion in charges, having warned of a possible $11bn write-down on unprofitable assets in December. Its stock was down 1.8% in premarket trading, same as that of Caterpillar which saw a better-than-expected earnings report but has seen its outlook revised lower by analysts.
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Technical Outlook for Dow Jones
The Dow continues to flirt with the 28731 support level, which also intersects the midline of Andrew’s pitchfork. Presently, the bearish candle has dipped below this level, but further confirmation of a breakdown is required.
A closing penetration below 28731.7 could open the door for more selloffs that target the next support at 28166.4 (previous highs of 26 November and 12 December 2019). The 50% Fibonacci extension at 27985 as well as the 21 November prior high at 27765.9 remain the downside targets for continued bearishness on the Dow.
On the flip side, easing of coronavirus fears may allow the markets to retest the 28731.7 resistance level. A bounce from 28166.4 could do the trick if the Dow succeeds in breaking the 28731.7 support level in the first instance. However, a rebound from present support levels, precipitated by a failure of today’s candle to breakdown the midline of the pitchfork may prompt the Dow Jones to retest 29326 instead. This price level is the 61.8% Fibonacci extension level from a trace of the August 2015 swing low to the December 2018 swing high.