The Dow Jones Industrial Average (DJI) reached a significant milestone on Monday, posting its first record close since May 17. The blue-chip index surged by 0.5% to reach a new all-time high of 40,211.72, marking its 20th record close of the year. The financial sector played a crucial role in driving these gains, with financial components contributing significantly to the index’s upward trajectory.
Technical analysis of the DJIA chart reveals an interesting pattern known as an ascending triangle. This pattern emerged after a period of sharp upward movement between October 2023 and March this year, followed by a consolidation phase. The ascending triangle is characterized by a horizontal line connecting swing highs and a rising trendline linking swing lows. This pattern typically indicates a continuation of the index’s longer-term uptrend.
On Monday, the DJIA broke out above the top trendline of the ascending triangle, signaling a potential further climb in the coming days, especially during earnings season. This breakout has prompted analysts to monitor key price targets for potential upside movements.
Using the measuring principle technique, analysts have projected a shorter-term price target of 43,500 by adding the distance near the start of the ascending triangle to the pattern’s top trendline. Additionally, a bars pattern analysis suggests a longer-term price target of around 46,615 based on the uptrend preceding the ascending triangle.
Despite the bullish outlook, investors should remain cautious of possible short-term retracements. The relative strength index (RSI) is currently showing an elevated reading above the 70 threshold, indicating potential overbought conditions. During profit-taking periods, investors should keep an eye on two crucial support levels.
The first level to watch is around 40,000, where buyers are likely to step in near the ascending triangle’s top trendline and the psychological round number. The second level of support is at 39,300, where the index’s price intersects with the lower trendline of the ascending triangle and the rising 50-week moving average (MA).
In conclusion, the DJIA’s record close on Monday signals continued strength in the market, with the financial sector playing a key role in driving gains. Technical analysis points to further upside potential, with key price targets indicating potential price levels to watch. However, investors should remain vigilant for potential retracements and monitor key support levels during periods of profit-taking.
Please note that the information provided in this article is for informational purposes only and does not constitute investment advice. Readers are advised to conduct their own research and consult with a financial advisor before making any investment decisions.
Source: Investopedia
