Dow Jones might have successfully carved a lower high around 28700/800 levels on August 28, 2020. The indice might be correcting for now and might re-test the above mark before turning lower again. Bears are looking poised to remain in control from here.
Dow Jones probable wave counts are as follows: The indice had dropped from 29600 through 18200 levels earlier, clearly sub dividing into 5 waves. A larger degree potential impulse wave has been marked as Wave (1) on the chart here.
Ideally, an impulse should be followed by a corrective wave in the opposite direction. The rally since 18200 mark through 28700/800 seems to have unfolded into 3 waves, hence corrective. Further note that prices remain well below 29600 which is initial point of Wave (1).
A typical guideline is as follows: Wave (2) never retraces Wave (1) more than 100%. If the above proposed bearish structure should hold, prices must stay below 29600 levels, going forward. Also, Dow Jones should reverse lower towards 25000 support in the medium term.
Immediate short term support is seen through 27500 levels, and bears should break below that to confirm a potential top in place. Alternately, a push through 29600 would change the immediate bearish structure as prices might attempt to print further highs.
Traders might be willing to hold on to short positions for now with protective stops above 29600 resistance. The projected targets over the medium term could be towards 25000 handle.
Technical Analysis Team
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