Dow Jones

Trade Signal: Dow Jones Index is Heading to $30,750

Dow Jones futures are up by more than 253 points, a day after the index dropped by more than 320 points. Other American indices like the S&P 500 and Nasdaq 100 are also up by almost 1%.

Disney is the company to watch in the Dow Jones today. Its share price is already up by more than 4% after the company reported better-than-expected quarterly results. Precisely, the company’s Disney+ service increased its subscribers to 74 million, which is a good figure considering that it was launched a year ago. The company also lost less money that what analysts were expecting.

In all, it reported a loss of 39 cents in the fourth quarter while its total revenue declined by 23% to $14.7 billion. This revenue was boosted by its direct to consumer business whose revenue rose by 41% to $4.9 billion.

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Still, the biggest concern for the Dow Jones is that the Covid outbreak in the United States is getting out of hand. Yesterday, the country added more than 140k new cases, which is a record. Indeed, the country has recorded more than 1 million cases in the past ten days, pushing the total to more than 10 million. Deaths increased by 1,171 to 243k.

As such, while progress has been made on vaccine, analysts have started to price-in another lockdown to tame the spread. In a statement yesterday, Dr. Michael Osterholm, who is a senior advisor to Joe Biden said that the country was about to “enter a Covid hell.” He also argued that the country needed another 4-6-week lockdown.

Another lockdown in the US would be a bad thing for the economy and the Dow Jones constituent companies. That is because it would hinder demand and disrupt their activities.

So, what does the future hold for the Dow Jones index in the next few weeks?

Dow Jones technical outlook

On the daily chart, we see that the Dow Jones has been on a strong rally recently. However, in the past few days, the index has struggled to move above $30,070 and below $29,000. This is nor an accident. For one, the index moved above the YTD high this week.

It also reached an important psychological level. Therefore, the current weakness is mostly because of profit-taking. Indeed, the index is forming a bullish consolidation pattern that is shown in black.

Notably, the Relative Strength Index (RSI) is now at 64, which is an indication that the index has more room to run. In the past, substantial declines happened when the RSI moved to the overbought level of 70.

Therefore, I expect that the index will retest its all-time high next week and possibly reach the next psychological level of $30,100. If it moves above this level, the next target will be $30,753, which is the upper side of the ascending pink channel. This trade will be invalidated if the price moves below the support at $26,080.

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Dow Jones chart

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