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Figure 1 shows daily bars for the Dow Jones Home Construction Index ($DJUSHB). The index advanced to its 200-day with a rising price channel and stalled over the last few weeks. Resistance at the 200-day is proving formidable. Even so, the overall trend is up as long as the channel holds. Look for a move below channel support to reignite the long-term downtrend. Yes, the long-term trend is down because the index is below the 200-day and the 200-day is falling. |
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FIGURE 1: DJUSHB, DAILY. The overall trend is up — as long as the channel holds. |
Graphic provided by: TeleChart2007. |
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The bottom indicator window shows positive directional movement (+DI) and negative directional movement (-DI). Note that a -DI (red) crossed above +DI (green) over the last few days. Such crossovers can signal the start of a trend reversal and channel support marks the last stand for the bulls. |
Figure 2 shows 60-minute bars with a head & shoulders pattern over the last five weeks. I drew the neckline through the spike low below 290 because it looks like an overshoot. Neckline support resides at 300. A break below this level would confirm the head & shoulders and also break channel support on the daily chart. Such a breakdown would target a move toward the 2008 lows around 230–250. |
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FIGURE 2: DJUSHB, HOURLY. A break below the neckline level shown would confirm the head & shoulders pattern and also break channel support on the daily chart (Figure 1). |
Graphic provided by: TeleChart2007. |
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The bottom indicator window also shows positive directional movement (+DI) and negative directional movement (-DI). This time, +DI crossed above -DI, which is short-term positive. Another short-term momentum shift would occur, should -DI move back above +DI. Such a shift could foreshadow a neckline support break. |
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