Technical Analysis – US30 stock index flirts with uptrend line and 50-SMA

Anthony Charalambous, XM Investment Research Desk

US30 stock index pierced below the uptrend line drawn from August 26 but found support from the 50-period simple moving average (SMA) around the 27,000 handle. The index has been in a two-week uptrend, during which it plotted a seven-week high of 27,312 from where the price inched down to test the uptrend line.

The Ichimoku lines, Tenkan-sen and Kijun-sen, completed a bearish cross but signal no clear direction. The Chikou span is declining with the price, warning of a possible drop unfolding. Momentum indicators also reflect a bearish picture, as the MACD has declined below its red trigger line and nears the zero level, while the RSI pierced through the 50-level and moves lower. However, the Ichimoku cloud concurs with the bigger bullish stance of the SMAs.

If the bulls retake control, pushing the price back above the trend line, the 27,175 level could apply some pressure. Surpassing this level could see the bulls reel in the 27,312 high, before a revisit to the all-time high of 27,403 could be considered.

If the tables turn and the bears penetrate below the 50-period SMA, around 27,000, the price could fall to test the Ichimoku cloud and the 26,832 support, which is the 23.6% Fibonacci retracement of the up move from 25,279 to 27,312. Moving into the cloud, a more durable support level at 26,534 could play out, which is the 38.2% Fibo and where the 100-period SMA also lies, once the swing low of 26,720 is overcome.

Overall, the short-term outlook is mixed while the bigger picture is bullish. However, either a break below 27,000 or back above the trendline would need to occur for the directional bias to evolve.