Dow Jones (DJI) Strategy this Earnings Season (April 2012): Key Supports & Resistances

Dow Jones (DJI) is approaching crucial support levels for the entire run-up that we saw this year. This could be a make or break situation and this time all eyes are on corporate earnings. If the earnings season disappoints the market then we could see the Dow Average taking a swift dip towards 12,000 index level. Discussing key levels on the Dow and VIX for the earnings season.

For now, the key support for the bullish momentum to hold remains at 12,700. I expect the market to come down to this level and then bounce back to retest the 13,200 region. Overall, I expect the market to remain ranged till the earnings season completely plays out and a clearer trend emerges.

This is not a good time to buy for long term; rather you should be looking at short term trading positions. I would place my stops around 12,700 on the index and any upside to 13,500 should be a good region to book profits.

Keep an eye on the VIX, it has a strong resistance at 22 and any closing above that level should be considered as a signal to cut out your long positions in the market. If the VIX were to fall below 15.50, it should be taken as a positive trigger for the market and in such a scenario the Dow should be good for a move up to the psychological mark of 14,000.

Use the comments section share your views on where this market could be headed this earnings season.

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Comments: 9
Option Maniac
12 April 2012
Reply

Do you think the Dow Jones Index can cross past 14,000 soon? What do you think can it make a move to 20,000 in next 2 years.

    Varun Walia
    12 April 2012
    Reply

    So far the market isn’t signalling any big move in near future, so 20,000 is more of a dreamers paradise. Although, 14,000 is possible but the real question is if it will hold that level. Barring a fresh bull run in global stocks, this market alone does not have the strength to cross 14,000 decisively as the key resistance or a “triple top” on the long term charts is placed around that level.

    So, be positioned to trade this market sideways. At the same time expect bouts of severe volatility occasionally. Ideal strategy would be to buy puts whenever the Dow moves towards the higher end of the range. On the downside, support will come at 12,700 and then 11900

S.K Kandol
11 April 2012
Reply

Good one, market had a little bounce from the discussed levels.

Varun Walia
10 April 2012
Reply

United Health Group (UNH) stock appears to be best poised for a rally, this could continue rising even if the broader market remains choppy. Here you can read more about this stocks long term outlook

http://www.comparebroker.com/blog/2012/01/11/time-to-buy-healthcare-services-stocks-why-invest-in-united-health-group-unh/

Trading Ideas?
10 April 2012
Reply

What I can make out from your post is that you expect the markets to be ranged. If that happens, this could be a great opportunity for traders. Could you list a few strong large cap stocks which are likely to rise more and correct less if we see a sideways market at best.

Jake Calf
10 April 2012
Reply

Really, we would love read more of your market trend analysis. It would be cherry on the cake if you could write about individual stock trading ideas every week or so. I have connected with you on facebook and twitter both, hoping to see frequent updates there if its not really feasible to blog too often.

Varun Walia
10 April 2012
Reply

Learn how to make money when stock markets are in a flux and sideway movement is the best case in scenario. Minting ample returns is very much possible with reliable strategies discussed in this investing article.

Bagging Returns Steering through Sideways Trending Markets:- http://www.comparebroker.com/blog/2011/01/13/bagging-returns-steering-through-sideway-stock-market/

I will share comprehensive list of stocks later, but to leave you with some trading ideas, you can look at UNH, Qualcomm and Infy. These are strong looking charts even for long term investors

R Miller
10 April 2012
Reply

Wow, what an analysis. Dow did not break 12,700 even when hell was breaking loose today. I guess we should have initiated small aggressive longs today. VIX too closed below the key resistance you suggested. I was going through the portfolio stock you have suggested for 2012 and beyond, all of them are outperforming and way above the levels you recommended them at. Thanks buddy, its good to find your blog, keep posting such analysis more often.

Varun Walia
10 April 2012
Reply

Thanks R Miller, I certainly want to make such posts more frequently, but it isn’t possible in my tight schedule. I usually post whenever there is a possibility of a short term trend change. So, keep visiting for those quick trading profits. You can connect with us through social networks and stay updated all the time.

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