Dow Jones ($INDU) Chart, 10-12-2007

I’m charting trend lines for the Dow ($INDU) again this week.  For the second week in a row the Dow closed above the July intraday high.  I’ve drawn three major up trending lines.  The top line has acted as the ceiling and the bottom line has been the floor.  They aren’t quite parallel, but both are moving up.  The middle line continues to be a potential speed bump for any move in the other direction and will connect with the horizontal line from the July high within two weeks.  If the Dow holds that line I might turn more confident with the bulls again. 

The 10 and 20 week moving averages are about to form a bullish cross, with the 10 week moving above the 20 week.  That’s not money in the bank by any means, but helps the bulls’ case.  I’m still expecting a move back to these moving averages, if not all of the way down to the 50 week moving average.  We’ve had five straight weeks in a row now with the Dow closing higher.  That doesn’t force the Dow down next week, but increases the chances of another volatile week, especially with options expiring in five days.  With all of my October naked puts so far out-of-the-money right now, I’d like a pull back this coming week so I can have a lower entry point the following week if I decide to get back in on the same underlying stocks. 

For the upside potential, nothing is standing in the Dow’s way to heading back up to the upper trend line.  I have to be weary of that move though considering how skittish the overall market was last week on little to no major news.  With earnings season picking up steam next week, the volatility should increase. If you are not reading the above article on www.mytradersjournal.com you are reading it from a site that has plagiarized it.

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