Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Charting the Multi-Timeframe Make or Break Support at Dow 12000

Mon, Aug 1, 4:11 PM ET, by Corey Rosenbloom

Well, here we are at the well-known Make or Break chart support at Dow 12,000.

This is what I mean when I say refer to critical chart reference levels to make objective sense of all the good and bad – often confusing – economic/political headlines affecting the market at the moment.

It’s really as simple as “The market is holding critical support so that’s objectively bullish, or it’s firmly breaking strongly under critical support which is objectively bearish.”

If you’re finding yourself confused as to which way is up or down in the US Equity Markets, take a moment to look at the following reference charts:

If you prefer the S&P 500, check out my prior reference post on the S&P 500:

“Making Sense of the Current SP500 Market Range”

“SP500 Critical Support on Weekly Trendline Confluence”

I’m a fan of keeping charts (technical analysis) as simple as possible and here it is:

Either the market supports and holds bullishly at 12,000, returning higher as it did recently in 2011 or it doesn’t, which opens up the door to expect 11,500 or even lower for a full trend reversal.

What we’re seeing presently in 2011 is very similar to that of mid-2010 where 10,000 became the major market “Make or Break” Bull/Bear Line in the Sand.

It’s not magic and price didn’t respect 10,000 perfectly, as seen with the 2010 low of 9,600 in June. We could still see a similar “nip” or trap here at the 12,000 level so don’t expect 100% perfection of chart magic.

Key levels reflect true battle points between Buyers and Sellers (Supply and Demand). A key level that breaks thus forces action from those trapped by failed expectations.

Subsequent moves create “Feedback Loops” that send the market moving off the inflection point in a sustained move. Traders look to take advantage of these low-risk points.

Let’s step inside the Daily Chart to see another reason why 12,000 is so important on the chart:

Similar to 1,280 on the S&P 500, the 200 day Simple Moving Average rests almost exactly at 12,000 which joins both the short-term trendline from the March 2011 low and the intermediate trendline as seen on the weekly chart.

Buyers have placed simple stop-losses under 12,000 and 11,900 (June low) which will be triggered should sellers push the index under 12,000 then 11,900. That’s something a trader can expect.

A breakdown under 11,900 returns the market to 11,600 where it will be a major battle of buyers and sellers. Should buyers/bulls lose the Supply/Demand battle at 11,600, then this could be deemed as an intermediate term sell-signal which would suggest (or confirm) a trend reversal down on the higher timeframe.

Key levels like this aren’t magic – however, they often trigger self-fulfilling prophecies that result in perpetual moves called “Feedback Loops” where traders can take advantage (or limit losses if caught on the wrong side of a feedback loop).

Speaking of Traders, aggressive short-term traders can easily take advantage of a price movement into a major/key price level:

Let’s assume you are an intraday or swing trader looking to buy into the expected support at Dow 12,000 (whether using futures or the DIA ETF or corresponding stock or ETF).

As the Dow tested the critical 12,000 level from 10:30 to 11:30am (CST), we observed reversal candles that were accompanied by both a positive momentum and TICK (market internal) divergence.

The combination of reversal signals and positive divergences off a critical make-or-break support level suggested odds favored an upward reversal in price.

If the upward reversal thesis failed, then that’s ok because this situation allowed for a tight stop under the 12,000 level (11,990, 11,980, and so on depending on your risk tolerance).

Keep in mind that price has a tendency to nip a few points under a critical level before reversing – we call this a “Finger,” “Trap,” or “Rinse/Wash” Situation. It happens.

Aggressive traders like to buy INTO a support level while conservative traders like to buy AFTER support held and price then breaks a falling trendline or moving average.

Price broke above 12,050 at noon, then broke above 12,075 at 1:45pm.

It can be a little less stressful to buy on a breakout than buying into support, at least if you want greater odds that a support level is holding.

At 12:30pm, the TICK (internal) gave a “Kick-off” Reversal signal which further confirmed that the odds shifted to favor a positive/bullish reversal.

As of this writing, price rallied higher from 12,000 to the 12,125 level.

Anyway – that’s a discussion of a short-term intraday set-up, the kind of which I describe each day in the Idealized Trades reports (with more detail, explanation, and trade logic for reference).

The main idea is this:

There’s a lot of economic and political news affecting the market at the moment – more than usual.

At times of increased noise and volatility, it’s important to pull the perspective back and look at the big picture to focus on critical price levels in key markets.

For now, 12,000 is the critical reference level to watch in the Dow Jones, just as the 1,280 and 1,260 level is critical to watch in the S&P 500.

Use these levels as references to guide your game-plan and trading decisions accordingly – otherwise you may feel very bullish one day and then tremendously bearish the next.

Ground yourself with objective price reference levels and observe how price is behaving at these levels.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey's new book The Complete Trading Course (Wiley Finance) is now available!

blog.afraidtotrade.com


SDI Glossary: "price" Definition
SDI Glossary: "Equity" Definition
SDI Glossary: "Finance" Definition
SDI Glossary: "Support" Definition
SDI Glossary: "TA" Definition
SDI Glossary: "TICK" Definition
SDI Glossary: "Trend" Definition
This Article's Word Cloud:   Corey   Loops   advantage   afraidtotrade   battle   both   bullish   chart   critical   economic   expect   from   here   higher   important   intermediate   into   level   levels   like   look   magic   major   market   moment   objective   odds   points   political   positive   price   reference   reversal   seen   short   simple   support   take   term   that   then   these   this   traders   trendline   under   where   which   will   with

| More

Fast Fall for Ford Shares into Key Target
Tue, Sep 30, 11:11 AM ET, by Corey Rosenbloom

Ford shares (F) broke a critical support level and collapsed instantly toward the current key ...

Tight Range Compression Continues and Breakout Awaits for Chipotle CMG
Tue, Sep 30, 10:41 AM ET, by Corey Rosenbloom

For those awaiting a breakout in Chipotle shares (CMG), the wait may be coming to ...

Reversal Intraday Update and Stock Scan for Sept 29
Mon, Sep 29, 1:51 PM ET, by Corey Rosenbloom

New low? Reversal? Retracement? Let’s take a look at our intraday S&P 500 for today’s ...

Studying the Stealthily Strong Trender Disney DIS
Fri, Sep 26, 12:21 PM ET, by Corey Rosenbloom

You may not be aware that Disney (DIS) is one of the strongest trending stocks ...

EMA Compression Breakout Trade Forming in Chipotle CMG
Fri, Sep 26, 11:41 AM ET, by Corey Rosenbloom

Chipotle shares (CMG) are forming an “EMA Compression” trade set-up which is a specific type ...

Weekly Pullback Planning for SP500 and Dow Jones
Thu, Sep 25, 3:31 PM ET, by Corey Rosenbloom

Following up from the prior “Pullback Planning Update,” let’s take a quick look at the ...

Bearish Breadth and Price Collapse Stock Scan and Update for Sept 25
Thu, Sep 25, 2:11 PM ET, by Corey Rosenbloom

Look out below! Price broke support and collapsed in a liquidation event today where the ...

Bouncing Market Update and Trending Stock Scan for Sept 24
Wed, Sep 24, 2:11 PM ET, by Corey Rosenbloom

Right on schedule, price rallied up from a known support target level and we have ...

Support Range Bouncing for the SP500
Wed, Sep 24, 12:11 PM ET, by Corey Rosenbloom

Despite the lengthy uptrend, the shorter-term S&P 500 has devolved into a sideways trading range ...

Creeper Trend Continues Intraday Update and Stock Scan Sept 23
Tue, Sep 23, 3:11 PM ET, by Corey Rosenbloom

Here we go again! The market continued its slide lower – as was widely expected ...

Decision Time for Netflix NFLX at Key Price Level
Tue, Sep 23, 1:11 PM ET, by Corey Rosenbloom

Netflix (NFLX) shares face an important turning point at a key support (pivot) level. Let’s ...

Triangle Trade Setting Up in Apple AAPL
Mon, Sep 22, 3:11 PM ET, by Corey Rosenbloom

With all the attention focused on the iPhone 6 this weekend, traders may be missing ...

Steep Retracement Midday Update and Trending Stock Scan Sept 22
Mon, Sep 22, 1:51 PM ET, by Corey Rosenbloom

Well this is fun, isn’t it? The market actually traded lower after many days of ...

Planning the Pullback in the Big Three US Equity Indexes
Mon, Sep 22, 1:11 PM ET, by Corey Rosenbloom

In simplest terms, a pullback or retracement is the most logical thing to expect for ...

About that Death Cross in the Russell IWM…
Fri, Sep 19, 4:21 PM ET, by Corey Rosenbloom

I’ve been hearing a lot of discussion about the “Death Cross” in the Russell 2000, ...

New Highs Again and Trending Stock Scan for Reversal Day Sept 19
Fri, Sep 19, 3:21 PM ET, by Corey Rosenbloom

Perhaps not surprisingly, the stock market pushed yet again to another intraday high today as ...

New High Market Update and Stock Scan Sept 18
Thu, Sep 18, 2:11 PM ET, by Corey Rosenbloom

Perhaps not surprisingly, the stock market pushed yet again to another intraday high today as ...

Rally into Range Resistance for Google GOOG
Thu, Sep 18, 1:11 PM ET, by Corey Rosenbloom

Google (GOOG) faces an important “make or break” resistance challenge as a short-term range pattern ...

Fed Day Market Update and Stock Scan Sept 17
Wed, Sep 17, 1:31 PM ET, by Corey Rosenbloom

After yesterday’s strength, we have today’s retracement of the bullish reversal. Though price pushed to ...

Bullish Reversal Stock Scan and Market Update for September 16
Tue, Sep 16, 2:11 PM ET, by Corey Rosenbloom

And now for something a little different! Today’s session sported a strong Bullish Reversal in ...

Hidden Support Areas Revealed from Moving Average Clusters
Mon, Sep 15, 4:51 PM ET, by Corey Rosenbloom

When using moving averages on a chart to find possible targets and support levels, which ...

September 15 Stock Scan and Market Update
Mon, Sep 15, 2:11 PM ET, by Corey Rosenbloom

We’re still charting the key levels on the S&P 500 along with trending stocks of ...

September Scanning for Overextended Stocks
Mon, Sep 15, 12:41 PM ET, by Corey Rosenbloom

What are the top five most over-extended (bullish uptrending) stocks and which are the top ...

Quick Charting New September Trends in Cross Market Money Flow
Fri, Sep 12, 2:51 PM ET, by Corey Rosenbloom

Even if you are only a stock market trader, it’s important to view money flow ...

Reversal and Market Update with Stock Scan for September 12
Fri, Sep 12, 2:21 PM ET, by Corey Rosenbloom

The intraday downtrend continued and price traded down from the 1,997 inflection level mentioned in ...

Updating our TICK Volatility Charts for September
Thu, Sep 11, 4:31 PM ET, by Corey Rosenbloom

I know, it’s not the most compelling title, but it is very important for all ...

September 11 Midday Market Update and Stock Scan
Thu, Sep 11, 2:11 PM ET, by Corey Rosenbloom

What levels remain important for the S&P 500, what does Breadth suggest about today’s price ...

Market Update and Stock Scan for September 10
Wed, Sep 10, 2:41 PM ET, by Corey Rosenbloom

The S&P 500 is downtrending on the intraday frame and pulling back from a resistance ...

The Course of Crude Oil Never Did Run Smooth
Wed, Sep 10, 12:41 PM ET, by Corey Rosenbloom

If you’re a trader or follower of crude oil, you’ve noticed the increased volatility and ...

New Video and Tuesday Training Webinar with John Carter on Beating the Market Makers
Mon, Sep 8, 6:11 PM ET, by Corey Rosenbloom

As a follow-up from his earlier document “Understanding Options,” John Carter released a new video ...

September 8 Market Update and Trending Stock Scan
Mon, Sep 8, 3:51 PM ET, by Corey Rosenbloom

As we wind down our first trading session of the week, let’s take a look ...

Triangles Breakouts and Trends for USDJPY Japanese Yen
Mon, Sep 8, 1:41 PM ET, by Corey Rosenbloom

We’re seeing another price expansion or trend phase from a triangle breakout in theUSDJPY (Japanese ...

September 5 Reversal Play and Market Update
Fri, Sep 5, 2:31 PM ET, by Corey Rosenbloom

The market has reversed course each day this week and today’s session is no exception. ...

BP Breaks Down through Open Air into Key Target
Thu, Sep 4, 2:21 PM ET, by Corey Rosenbloom

This morning’s session for BP has been a windfall for the bears. However, shares trade ...

September 4 Market Update and Trending Stock Scan
Thu, Sep 4, 1:51 PM ET, by Corey Rosenbloom

What a fun week it’s been so far! Buyers short-squeezed the market higher each day ...

September 2 Market Update and Daily Stock Scan
Tue, Sep 2, 2:31 PM ET, by Corey Rosenbloom

After a holiday weekend, the market returned with a volatile Tuesday! Let’s chart the broader ...

New eBook on Understanding Options from John Carter
Mon, Sep 1, 2:31 PM ET, by Corey Rosenbloom

John Carter is at it again! This time he’s written a simple eBook entitled “Understanding ...

Answers to the Top Three Questions about Computers for Traders
Fri, Aug 29, 2:11 PM ET, by Corey Rosenbloom

When working with traders, I’m often asked questions about desktop (or even laptops while on ...

August 29 Holiday Update and Stock Scanning
Fri, Aug 29, 1:31 PM ET, by Corey Rosenbloom

While the 2,000 index level is critical to our trading decisions, buyers and sellers continue ...

August 28 Intraday Stock Scan and Market Update
Thu, Aug 28, 1:21 PM ET, by Corey Rosenbloom

Our key focal level for the S&P 500 continues to be the simple 2,000 index ...

Planning Fibonacci Retracement Levels for SP500 and Dow
Thu, Aug 28, 12:11 PM ET, by Corey Rosenbloom

“Always be prepared.” Should the market continue trading down against the 2,000 level in the ...

Stepping Inside the Straight Up Rally for the SP500
Wed, Aug 27, 3:51 PM ET, by Corey Rosenbloom

What does the chart suggest about the current rally into 2,000 and what can we ...

Join Corey Wednesday for a Special Five Steps to a Reversal Webinar
Tue, Aug 26, 1:11 PM ET, by Corey Rosenbloom

I’m excited about a webinar opportunity I’ll present for you Wednesday as part of Trader’s ...

Charting Three Top Trending Stocks to End August
Tue, Aug 26, 11:11 AM ET, by Corey Rosenbloom

I’m a big fan of the concept of “Strong Getting Stronger,” and three such stocks ...

Current Market Rally Echoes a Pattern from the Past
Tue, Aug 26, 10:41 AM ET, by Corey Rosenbloom

If you look closely at the current market rally, you may see something eerily familiar. ...

Bearish Engulfing Opportunity in Altera ALTR
Mon, Aug 25, 2:31 PM ET, by Corey Rosenbloom

Altera (ALTR) showed up on two of my stock scans this morning and I wanted ...

August 25 Breakout Market Update and Stock Scan
Mon, Aug 25, 1:41 PM ET, by Corey Rosenbloom

Well there we have it! It’s official – the S&P 500 achieved the 2,000 Magnet ...

Charting Apple AAPL Through the 100 Dollar High
Fri, Aug 22, 12:11 PM ET, by Corey Rosenbloom

Last week I posted about “Open Air” and magnet levels in Apple – let’s update ...

August 21 Stock Market Update with Trending Stock Scan
Thu, Aug 21, 2:11 PM ET, by Corey Rosenbloom

As we continue yet another trend day to the upside, let’s highlight the price action, ...

Color Keltner Channel Chart into Highs for SP500 and NASDAQ
Thu, Aug 21, 1:11 PM ET, by Corey Rosenbloom

Sometimes it’s helpful to look at one indicator at a time, and we can do ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Charting the Multi-Timeframe Make or Break Support at Dow 12000 | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.