Does A Bull Flag?

Dow Jones Industrial Averages - 02-03-2015So far February is keeping up with rest of the year in terms of volatility and triple-digit Dow days. Tuesday February 3, was no exception. Dow Jones Industrial Averages surged 305 points, but unlike January, first two February days were triple-digit up days for Dow.

With the current price action, DJIA is making bullish flag formation, though it does not adhere to the text-book style. S&P 500 is also making a similar pattern but Dow’s look more like a flag.

DDM - 02-03-2015A strong close above 17,700 will complete the pattern. Off course, the all time high of 18,103 made on Boxing Day will act as a significant resistance. A break above that may take the index to the flag’s measured target near 19,285 range.

DDM, ProDhares Ultra Dow30 ETF, is a good trading vehicle for this rally, if it takes off. It needs to break above $132.90 to complete the pattern. The top resistance for it remains at 138.94, which is about 4.5% above it. An aggressive stop would be just below Tuesday gap at $127.50, or a risk of 4.1%. A conservative stop would be below the pattern at $122.75 for a risk level if 7.6%.

Many Dow Components are bouncing off the lows and some are making new highs. Many of the highly  beaten down stocks are outperforming the Dow. Here are the five that have outperformed the index over one day and 7-day period.

  1. Caterpillar Inc. (CAT) was a victim of global slowdown and the general economic slack. It is in the process of breaking a down-trend line and is closing a gap-down.
    Caterpillar - 02-03-2015
  2. Chevron Corp (CVX) was road-kill of the crude’s rout. On January 30, it bounced off after testing the December low along with the crude’s bounce. Since then it has been tracing a descending triangle. A break above the upper bound over Tuesday high will be quite bullish.CVX - 02-03-2015
  3. Exxon Mobil Corp, (XOM), is another big oil name that is rising from the dead. It tested it recent lows  for the third time – in mid-October, in mid-December and January-end. Now it is also breaking above a descending triangle, which is inside a larger horizontal channel.XOM - 02-03-2015
  4. Goldman Sachs (GS), made a double top (DT) at the end of last year then broke below the intermediate low on January 14 with a gap down. It then tested the mid-October lows and bounced off that. So far it had not reached the measured target of the DT pattern but it is gearing up to challenge the gap.GS - 02-03-2015
  5. Home Depot (HD) has been on an uptrend for some time. It is one of the stock that has been powering the rise of Dow and it still managed to outperform the index after the late-January fall.HD - 02-03-2015150203_D


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