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IndicesThe Dow Jones Bollinger Bands Setup

The Dow Jones Bollinger Bands Setup


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Let’s have a look at the Dow Jones Dow 30 (DJIA) on the 4-hour chart. I am looking at trading this potential Bollinger bands set up. There is also double bottom of sorts. We have the Bollinger bands on and I have highlighted a zone of support/resistance in yellow.

We can call this zone the neckline. This zone has been flipped from support to resistance and back to support many times in the past. Currently, we are sitting above this zone so I would like to see a pull back into the zone before opening up a long position targeting the 32550 price level.

The double bottom is not perfect, but then again, patterns in trading rarely are. The wick-up to the yellow neckline shows me that this is an area that is respected. So, with that in mind, if we can flip that area into support, then it gives way for a possible long entry.

The middle line of the Bollinger bands lines up nicely with the yellow neckline adding confluence to the setup.

Looking at the MACD Histogram, we can see we have some divergence that has shown the bears weakening across the two ‘bottom peaks’ of the wonky-looking double bottom. The MA lines of the MACD have crossed over but are still below the Histogram, indicating bullish price action but the larger trend still being bearish.

Trading on the 4-hour does give a little leeway and breathing room however,
don’t mistake this for being easy. This market can whipsaw about and stop
hunting you out a thousand times before you get an entry. This is why you
should rather wait, be patient, and only enter this market if you are following
all of the rules from your trading plan and strategy guide.

The Dow Jones is a beast of a market and has a ton of liquidity. It moves quickly and can be expensive to trade. This is why we must be certain of our entry, Stop loss and take profit zones.

I always look for a minimum risk to reward of one to two. Be careful of where you place your stop loss. Make sure it is under the previous price structure if you are going long and there is enough breathing room. Using trailing stops on the Dow can be very beneficial in a trending market. If the market is ranging, use price action and candles to help confirm entries and exits. Examples of this can be engulfing candles, tweezer tops and bottoms, and Doji candles as well. These can all give signs of then the market can potentially reverse. Use this knowledge to add to your bag of tricks and most important of all, remember to backtest. Do not just jump in blindly without first testing a strategy to make sure it is profitable in the long run. You might find that your particular strategy does not work in certain markets or in certain time frames.

This is the 4-hour chart so patience must be respected to trade this time frame.

Let’s watch and see what happens when the markets open.

Have a great Monday and a great week ahead.

The Vortex Trader

Prediction Analysis Overview Table

Analysis Overview InformationPrediction Analysis information
On what market is this position based (Forex, Stocks, Crypto, Indices, or Commodities)?Indices
What is the trading position identifier (Name and/or Symbol)?DOW JONES      
Is this a Short or Long Position?Long
Would this be considered a Short Term, Medium Term, or Long Term trade?Medium Term
As a Short, Medium, or Long Term trade, which best describes the position (Scalping, Day Trading, Swing Trading, or Position Trading)?Swing Trading
What Time Frame chart is the position based on (1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, Daily, or Weekly chart)?4-Hour
Depending on the asset, how much do you expect it to move in price or percentage?From Entry to Target – 2%%
What ratio of risk to reward is this trade/position? Choose your appropriate target(s)Approximately 2 to 1 Target 2 N/A Target 3 N/A
What were the technical analysis tools used? Tick the appropriate boxes;Chart PatternsIndicatorsPrice ActionSupport & ResistanceTrendlines
From the technical analysis tools and indicators provided, tick the appropriate boxes for the tools and indicators used to analyze the position;Ascending Triangle, ☒ Bollinger Bands, ☐ Candlesticks, ☐ Channel, ☐ Cup & Handle, ☐ Descending Triangle, ☒ Double Bottom, ☐ Double Top, ☐ EMA, ☐ Fibonacci Retracement, ☐ Flag, ☐ Head & Shoulders, ☐ MA, ☐ MACD, ☐ Order Blocks, ☐ Pennant, ☐ Rounding Top Or Bottom, ☐ RSI, ☐ Symmetrical Triangle, ☐ Volume, ☐ Wedge

Trading Prediction Success Probability Score

FSP ranks the probability of this trade a 5/10

  • Wait for Price to pull back into the yellow zone
  • Price could push straight through this zone and stop you out

Disclaimer: The FSP probability score is derived from adding and subtracting the positive and negative aspects of the position and is not a definitive sign of how the trade will play out. FSP is not in any way a financial advisor

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