Right out of the gate the new year has started with tensions erupting between Iran and the US. But aside from a strong, and not surprising (bearish) reaction from the energy and oil commodities, the global markets have continued onwards and upwards.
From a monthly perspective, it could be argued that the global (and more specifically US) indices are due for a retracement. However, many of the weekly and daily charts still show upside potential.
On my list today and for this week, I’m narrowing my focus to the least over-extended, and those with the most potential for further gains ahead of the next retracement.
The weekly chart of the US 30 has a smooth uptrend of higher-highs and high-lows, with the current low of this week connected with the 10 simple moving average (MA). The MAs are in the correct bullish order, and the momentum indicators below are also trending higher.
Finally, the current candlestick is bullish, and should it close this way, it sets up a potential weekly candle entry and a fresh weekly extension to the upside.
The monthly chart also has a confirmed uptrend and MAs in a bullish formation. Price action is an average distance from the MAs, but not excessively over-extended.
The momentum indicators are neutral, but not bearish at this time.
Key levels worth noting are a recent monthly level at 26,700 and a closer weekly level at 27,300.
On the daily chart, price has just tested 28,150 for support.
The daily chart also has the MAs in the correct order, but volatility over the last 5-8 candlesticks has technically broken the latest up trend. However, the current candlestick is also an aggressively bullish candlestick implying there is the possibility of pushing higher.
The direction of the overall momentum seems in my opinion to want to go higher. The important element is to identify a sensible entry level. In theory I could use the daily candle, but it’s particularly large, and instead there is a possibility of using the weekly candle, which is relatively smaller. Alternatively, I could wait for the 4-hour to produce a small-medium bullish entry candle in and around the 10 & 20 MA buy zone.
As per my risk and trade management plan, my entry is above the high of the bullish candle, with my stop-loss below the low. In this case, my stop-loss being below the 28,150 level, there would technically be is some additional stop-loss protection.
If I risk my usual 1%, I will be extra- careful to take partial profits should I gain profits when the markets move in my favour.
Happy trading.
