DJIA traded higher on Thursday, after it hit support slightly above the 25100 barrier. That said, the recovery was paused slightly below the 25600 resistance, marked by the peak of the 27th of July. On the daily chart, the price structure remains of higher peaks and higher troughs above the upside support line drawn from the low of the 6th of February and thus, we would consider the medium-term outlook to be positive for now.
If the bulls are strong enough to push the price above 25600, then we may see them aiming for our next resistance at 25800, near the peaks of the 26th and 27th of February. Nevertheless, a clear close above that barrier is the move that could make us more confident on larger upside extensions. Such a break is likely to set the stage for the 26300 territory, defined by the peak of the 1st of February.
Looking at our daily momentum studies, we see that the RSI topped near its 70 line and now points sideways, while the MACD, although positive, has also topped and fallen below its trigger line. Both these indicators detect slowing upside momentum and make us cautious that a corrective setback may be looming before the bulls decide to shoot again, perhaps for a test near the 25100 or 24945 support hurdles.
Now if those barriers fail to prevent the index from dropping further, then we may experience declines towards the 24500 area. However, even if this is the case, the price would still be trading above the aforementioned upside support line and thus, we would still see a decent chance for the bulls to jump back into the action.
We would like to see a clear close below that upside support line before we start examining whether the bulls have abandoned the battlefield. Such a dip is possible to initially aim for the 24000 territory, the break of which could carry more bearish extensions, perhaps towards our next support zone of 23500.
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