The Dow Jones is beginning to make a strong case for entering a phase of distribution. As the DJ:DJI is essentially an index of the American Economy, this will be a trading range that I am particularly interested in and will continue to watch over the coming months.
It's difficult to time moves when it comes to Technical Analysis. Targets/Levels are easy to do, but the question of "when" is often hard to answer. This will be a waiting game. I shall also take a look at some key stocks on the Dow 30 to see if there's a consistent pattern of slowing bullish momentum, supply sneaking into the market, or the beginning of distribution phases.
Don't know about you, but the more I study this chart the more I believe the CO's are absorbing (accumulating shares) not distributing shares. I'm somewhat befuddled because volume to date does not confirm. What are your thoughts?
dscrockett
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You might try adding the Darvas Box indicator which does help to define the trading range. Also, try adding the Chaikin Money Flow indicator (21-day) to define points of demand and supply. Configure the latter using bars instead of the default, line chart. I am tracking the potential distribution of the DJI using the same, keep us posted. Thanks, Greg
AzorAhai06
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@skoutas, This is very useful. Thank you! Curious, I'm not used to the CMF Indicator, how are you using it to identify points of supply & demand? When CMFI reaches above a certain threshold, is that an area of supply? and the converse for demand?
dscrockett
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@AzorAhai06, Use bars with the indicator. Above 0 equals demand, below 0 equals supply. Reference "The Wyckoff Method: A Tutorial on StockCharts.com for how Wyckoff used supply and demand to determine turning points. Of course, CMF post dates Wyckoff who died in 1934. Happy trading.