The stock market consolidates current levels and Dow Jones forms a pennant on the daily chart. The measured move points to new all-time highs, as long as the price does not fall below 27,500.
The U.S. indices traded with a bid tone ever since the March meltdown. Many investors fled the stock market out of fears of losing their savings, only to watch the prices coming back to all-time highs. Is this a USD story or the stock market’s comeback reflecting a business cycle that turned a corner?
Regardless of the answer, the market is supported on every dip so far. Continuation patterns are everywhere, and the earnings season is full of positive surprises.
The last one to smash expectations – Walmart.
Walmart Crushes Q2 Earnings Expectations
Walmart is up 6% premarket as it reports better than expected earnings. Its online sales almost doubled in the quarter, and the consolidated gross profit rate increased too. While the international sales fell by 6.8%, the U.S. e-commerce sales more than made up for the difference.
As a component of Dow Jones, it is expected to sustain the index on any bearish price action. The same is valid for Home Depot, which reported better earnings too.
Investors’ optimism is fueled by an accommodative Fed and a declining dollar. Faced with a strong earnings season, the investors are willing to take risks despite the rising valuations for many companies.
Dow Jones Technical Setup
The price action on the Dow Jones speaks for itself – a pennant formation after a strong rally. The measured move for the possible pennant formation (the blue line) represents the distance until the pennant’s formation, projected from the upper edge of the pennant. When calculating it, the outcome exceeds the 30k level, meaning a new all-time high on the Dow Jones index.
To trade it, wait for the price to break above 28,160. Next, set the stop loss at 27,500 and target a move beyond 30,000.