Dow Jones fell 220.40 points (-1.83%) down to 11,842.69 on Friday 20 June 2008 while Nasdaq fell 55.97 points (-2.27%) to 2,406.09 points. Last week was a continuation of the downward movement after a week of short pause for the bear to catch its breath. The Dow has fallen more than 1,300 points since its 61.8% retracement from the previous downtrend leg. The news that we have been hearing all these while were more confused than we were. At one point, we were hearing that the downtrend was over and at another point that the bottom was not even near. We were tossed from the left and to the right by the market news. Are you confused? That’s the market noises you are listening to. Stick your eyeballs to the chart and don’t listen to your neighbors gossiping on stock tips. Let’s look at the chart for clarity.
Now, what we do have here in the chart? I do recommend that we constantly look at the weekly or monthly chart for clarity. That’s what I do. Sometimes in daily chart we are not sure of the nature of the rally. It always looks like the bull is coming back and the bottom were over. Be patience and wait for the weekly chart to confirm your chart analysis. For the week ended on June 13, there was a short rally up. Wait a minute; it was just a pause before the bear continued its journey to the south. Had you bought any shares during the rally, you might get stuck with it if you didn’t get out in time.
Let’s us wait and see how this coming week unfolds itself. We can’t and should not dictate how the market should behaves but instead we should take our stand based on technical analysis to enter and exit the market according to the trading signal with stop-loss as our risk management. Can the Dow breaks the low of 11,600 points this week or will pause again before continuing the downtrend movement next week? Watch the chart and cut out from news on the radio or net. However, we should watch out as I believe this week and next will present to us a violent and volatile week with big moves that can be very profitable. Stick to your short positions until the market gives us the exit signal.
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