Transports Test 50 day EMA – Watch Current Levels

Oct 1, 2009: 1:18 PM CST

The Dow Jones Transports Average ($TRAN) is testing its 50 day EMA at the 2,700 level – we need to keep a watch on this level to see if it breaks… or holds.

Keep in mind that the Dow Jones Index today just broke the rising 20 day EMA – the Transports Index is slightly ahead of the Dow (or ‘weaker’ than the Dow) in downside action.

Taking a look at the chart, we see a solid rally from the March lows that led to the “Head and Shoulders” in the Dow and S&P – which really was a rectangle formation in the Transports as seen here.

Finally, price broke the 3,400 level in late July which led to the recent rally into the fresh 2009 highs above 4,000.

Transport Index volume is actually picking up (increasing) as price has been falling each day (red bars represent total volume on the down day; gray volume bars reflect up days) – that’s bearish.

It’s critical for Bulls/Buyers to hold the 3,700 Index level – failure here would likely send prices lower to test the 3,200 level, which would reflect the 200 day SMA and the prior “Value Area” consolidation mid-year.

Bulls could still hold ground here, but a strong break under the 50 EMA (and a close underneath that last more than one or two days) would clue us in that we’re more likely to experience lower prices as expected support breaks.

Let’s watch this closely this week to see the outcome and what it might mean for the broader market.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

10 Comments

10 Responses to “Transports Test 50 day EMA – Watch Current Levels”

  1. Dan de Man Says:

    If it makes it to the 200 that would be awesome. That is where we can find the low risk / high reward trade.

  2. terlyn Says:

    I can imagine a possible double top in the future from a bounce from here, but just a guess. Looks too lopsided to just drop from here. Not a very technical analysis 🙂

  3. Corey Rosenbloom, CMT Says:

    Dan,

    That would be a logical target if the 50 is broken, and should lead to some sort of support bounce – stop underneath.

    Good call!

  4. Corey Rosenbloom, CMT Says:

    Could indeed see a double top but today's closing action took us to 3,711. A break beneath 3,700 would be the line in the sand – it could be a mirror image of the rally up (in that we're having a decline down) to the 3,600 area.

    Sometimes the biggest drops come from lopsided patterns.

  5. gamingthemarket Says:

    Wow today was exciting! Out of a couple hundred active stocks there are 22 names sitting on 60 day LR2 lines. There are a ton of names that appear to be at an inflection point. That is a point where the prevailing trend returns or a new trend begins. It’s make it or break it time!

    Also updated the GTM Chart Gallery with 26 new linear regression channels.

    Inflection Point
    http://www.gamingthemarket.com/inflection-point

  6. Dan de Man Says:

    If it makes it to the 200 that would be awesome. That is where we can find the low risk / high reward trade.

  7. terlyn Says:

    I can imagine a possible double top in the future from a bounce from here, but just a guess. Looks too lopsided to just drop from here. Not a very technical analysis 🙂

  8. Corey Rosenbloom, CMT Says:

    Dan,

    That would be a logical target if the 50 is broken, and should lead to some sort of support bounce – stop underneath.

    Good call!

  9. Corey Rosenbloom, CMT Says:

    Could indeed see a double top but today's closing action took us to 3,711. A break beneath 3,700 would be the line in the sand – it could be a mirror image of the rally up (in that we're having a decline down) to the 3,600 area.

    Sometimes the biggest drops come from lopsided patterns.

  10. gamingthemarket Says:

    Wow today was exciting! Out of a couple hundred active stocks there are 22 names sitting on 60 day LR2 lines. There are a ton of names that appear to be at an inflection point. That is a point where the prevailing trend returns or a new trend begins. It’s make it or break it time!

    Also updated the GTM Chart Gallery with 26 new linear regression channels.

    Inflection Point
    http://www.gamingthemarket.com/inflection-point