Dow Jones Target at 50,000? Technical Analysis Says It's Possible...

The Dow Jones Industrial Average (DJIA) has been facing a challenging economic landscape in the United States, characterized by rising inflation, increasing interest rates, and a weakening dollar index.

Additionally, the recent credit rating downgrade by Fitch has added to the uncertainty. Despite these economic problems, a technical analysis of the DJIA's weekly chart indicates a potential bull case scenario.

This article deep dives into the historical patterns and technical indicators to assess whether the DJIA can reach the milestone of 50,000 in the long term.

While the chart patterns suggest a bullish scenario, investors must be cautious and consider the economic risks before making investment decisions.

 

The Technical Analysis Says...

 

History Repeats Itself

One of the fundamental principles in technical analysis is the belief that history tends to repeat itself. This means that past price patterns and trends often reoccur in the future, allowing chartists to identify potential trading opportunities.

Comparing the current weekly chart with the historical data, 2016 to identify similarities in market behaviour and potential recurring patterns.

 

Weekly Chart 1

Source: Tradingview

 

As we analyse the weekly chart in 2023, it appears to mirror what we observed in 2016. The recent breakout on the price action, coupled with a bullish range shift, provides confirmation of the resumption of a bullish trend following an extended period of consolidation.

Drawing from historical data, we find that after the bullish breakout in 2016, the index experienced a remarkable rally of over 45%. Applying this percentage to the recent breakout level suggests an approximate long-term target of 50,000. This projection provides an exciting prospect for investors and market participants alike.

 

Weekly Chart 2

Source: Tradingview

The second chart reveals multiple bullish head and shoulders patterns, which are indicative of the bulls being in control of the prevailing trend.

The presence of these patterns suggests that the market sentiment is predominantly optimistic, with buyers exerting significant influence. Moreover, the break and subsequent retest at the neckline level, which lies within the range of 34,400-35,000, can serve as a potential accumulation zone.

The formation on bullish head and shoulders at 200WEMA (Weekly Exponential Moving Average) marked by orange on charts adds the bullish strength to the patterns.

The multiple occurrences of this bullish pattern on the chart underscore the strength of the bullish sentiment, reaffirming the likelihood of further upward movement in the market. 

While the target of 50,000 seems promising based on historical trends and technical analysis, investors must also take into account the existing economic risks and exercise prudent risk management strategies.

Note: This comprehensive report is intended for informational purposes only and should not be considered as financial advice. Investors should conduct thorough research and seek professional guidance before making any investment decisions.

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