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Javid Shaik has been trading since 2002, specialising in the Forex market but with considerable experience trading stocks & shares, indices and commodities on a number of platforms. Born in London, Javid has always been an independent thinker which, coupled with a background in IT, has... More
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Dynamic Trader
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  • Trend Trading the Dow Jones 0 comments
    Jan 4, 2012 7:12 AM

    Yesterday the Dow Jones brokeout of it's November range and started to show signs of strength again.  While some traders maybe happy at the thought of a bullish market and up trend continuation, we need to identify if this is really the case or is it a fake breakout yet again.

    Advanced Get users applying Stochastics will see the false bar indicates an uptrend continaution in place of an overbought market.   Aside from identifying the trend, if we look at our main indicator, we can see price has closed above the November range and around the July 2011 support/resistance point.  This could indicate a false breakout and if price dips into it's prior trading range, then this market has no real belief in an uptrend.  If the price does continue the journey up then the red shaded area shows the zone of resistance.  A top fake breakout possibility aside, clearing this resistance area and figure could provide the belief and momentum for an up trend continuation allowing the bulls and trend traders to take full advantage of the breakout.

    It is too early to jump into this market as a bull and unclear if a bearish stance is the right choice.  When faced with difficult trading decisions, it is always best to stand aside and wait for the market to tell you what it is doing.  We should always refer to our Trading Tools to help with our decision making but sometimes it is just best to ignore a market until there is a good reason to trade it and right now, this market is devoid of a clear trend and chart pattern and so should be ignored and the best position is being on the sidelines.

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