DJIA through the eyes of a bear

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Lets take a look at DJI and a very bearish scenario, as many elliotticians believe that we are currently in the final stages of a large-scale bear rally or even at the start of a new downward move similar or even bigger to the 2008 decline.

dow60m

As shown above, we use the 60 minute closing prices chart of DJIA. With that detail as an important starting point, we see five clear impulsive waves unfold from 13640 to 12515. What follows could very well be a corrective A-B-C pattern as part of wave 2. This wave count is the most bearish wave scenario that has many followers and supporters. First of all lets see what could strengthen this scenario. A downward impulsive move towards 13100-150 would be a good start for bears. But there is when things get tough. Selling pressures should be strong enough for wave B low to be broken decisively. If our bearish count is correct, we expect the 3rd wave down to start at anytime. Third waves are usually the strongest, therefore the pitchfork support at 12850 should be easily broken as soon as the decline accelerates. The next big support level is 12515. If this level is broken, the road ahead for much lower targets is open. Wave 3 would be underway and holding long positions at that time would be very risky.

So what do bears want to avoid? According to this wave scenario, prices should start falling soon and picking up speed along the way. If however prices just make a correction towards 13100-200 level and bounce upwards, bullish wave scenarios would increase their chances of success. If you need help trading this index and for more in-depth detail on our analysis, don’t hesitate to contact us.

As always, thank you for taking the time to check up on my thoughts.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.