The Dow Jones index remains close to all-time highs as investors keep bidding for the equity market. As such, shorting the index here represents a contrarian view and should be avoided unless the index breaks the neckline of the bearish pattern. Otherwise, the risk is that the market will keep pushing for new highs after it will take the resistance area.
The main event this week is the Fed’s decision on Wednesday. The Federal Reserve of the United States is widely expected to keep the interest rates and the overall policy mix on hold two days from now. However, this does not mean that the stock market will not move, as the press conference is crucially important.
More precisely, the focus is on what the Fed’s Powell will say about the economic outlook. If the future guidance is hawkish, the market will reverse sharply. For the Dow, it means a move either below the neckline or towards new highs.
Dow Jones Technical Analysis
To capitalize on the triple top, bears may want to wait for the price to close below the blue line seen below before going short. The stop-loss, or the invalidation area, should be 31,250, and a proper risk-reward ratio of 1:2 indicates that the take-profit level should be set below 30,400.
Dow Jones Daily Chart