Originally published by guppytraders.com
A few weeks ago, on CNBC I noted the contradictory nature of the triple top on the DOW. One the one hand this was a very strong resistance feature and it suggested another retreat from this level. This developed. The strong resistance suggested a continuation of the prolonged sideways movement in the Dow.
On the other hand, the very strength of this triple top can be bullish. Because it is so strong it means that any breakout above this level is usually very powerful. It's powerful because the features which contributed to the strength of the resistance level have disappeared. In stock, it means all the dedicated sellers have been bought out so there is no nearby resistance to stop the momentum of the breakout.
This is what has happened with the DOW. The eventual breakout above the triple top is very bullish and has an upside target near 30,000. This is calculated by taking the width of the trading band and projecting this upwards.
It doesn’t mean the DOW will reach this in a few days, but it does suggest there is a high probability of a steady uptrend. However, if you look back to the start of this trading band you can see that the initial rise from 23500 to 26600 took place over 9 weeks. History is unlikely to repeat because this rise was part of an established uptrend followed by a retracement and consolidation. The current activity is a breakout from a sideways movement so the prior momentum is absent.
This is not a shorting opportunity. Traders will use any weakness as an entry opportunity from the long side.