Technical Analysis: U.S Market – Snapshot Mid-term on neutral ground April 27, 2020 749

  • The S market enjoyed an unexpected recovery in late March and early April 2020.
  • Last week saw DJIA ranging between 22,916 – 24,240
  • Mid-long term we will see selling resume but DJIA will be range-bound between 19,000 to 25,000 range.
  • We expect the market to have some more upside despite the extenuating economic conditions. However, the upside should be short-lived with eventual downside potential testing the March lows.


The weekly chart shows a completed expanded flat corrective wave with prices rebounding back to the 18,000s support zone. The subsequent rally has broken the support-turned-resistance level at 21,712.53.

Based on the current price action and wave analysis, we maintain an outlook of a potential double-three corrective wave action. In other words, we might see the Dow Jones industrial Average range between 20,000 and 29,500 for a longer period before falling off to stage an eventual rally around the 15,810.79 – 16,876.52 levels.


The daily chart indicates that the corrective wave ABC has been completed as the price has broken out of the rising wedge formation. As we mentioned earlier on the weekly chart, the next stage of the index movement is on a final phase of the double three, which is a zig-zag move that consists of 5-3-5 sub-wave movements. Hence, the next possibility of the index is to complete a sub-5 wave down move.


To support the move of the 5-wave sell down, prices have the chance to break the recent high at 24,264.21 but its attempt to rally past that level was met with strong resistance. Furthermore, prices have been testing the 50 moving average line but failing to break above it. To add on, last Friday’s candle was a hanging man at the top of the trend and it failed to close above the Thursday high, signifying a weakness in the move. Besides that, the price has broken out of the wedge formation, signalling a change in trend.

Short-term potential rebound will be at 20,524 and 18,903.


Based on the transportation wave analysis, we can conclude that Transportation may end in a double-three corrective action. However, the difference is that the Dow industrial has completed its expanding flat while the transportation average has yet to complete as it has only complete wave iv.

Dow Transport’s attempt to rally beyond last week low was ended with defeat, forming 2nd hanging man. Observing how the 2nd hanging man closes below the first hanging man, the bullish momentum seems to be weakening. Thus, the expectation of a continued sell down for the transportation index have increased after last week’s price action. 


Among the 3 Indices in the U.S, NASDAQ Composite has fared the best among the three and the wave count slightly differs from the rest. In both the S&P 500 and Dow Jones Industrial Average, the wave count is on the 5-3-5 zig-zag formation whereas the NASDAQ is on the 3-3-5 flat corrective action. As such, there are strong signs that NASDAQ will continue its rise towards 9,542 region before a sell-off.

However, the pre-condition of an upside rally to continue is that NASDAQ must continue to close and break above the 61.8% of wave A. Otherwise, NASDAQ will face a further setback to 7,500 before staging a rebound.

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