Dow Jones Industrial forming head and shoulders pattern, part 2

I wrote about "head and shoulders Pattern" on 21st and 23rd of June 2010. I was expecting this pattern to be formed. I was right. We can noticed clearly than it is actually formed in Dow Jones Industrial (DJI). For your information, the "head-and-shoulders" pattern is believed to be one of the most reliable trend-reversal patterns.

Basically, most of the investors/traders do their research based on the fundamental analysis and technical analysis. For technicians/chartists, it's gonna be downside bias for them. The head and shoulders pattern is definitely a real concern to them. For fundamentalist, things are not looking good either. US, Europe, Japan and China, all these economy power houses have been releasing lots of negative news.

As we can see from the chart above, there was a very short term rally from 8th to 18th June 2010. What makes me worry was the trading volume was not increasing as the rally was happening. I did not buy into the rally, in fact I was clearing my call warrants and started buying put warrants.

After 18th June 2010, when DJI was starting to decrease, the volume increased. The volume is increasing as DJI keeps moving down. If DJI fails to hold on to the support level of 9759, I really think we will see a major tanker in July 2010. This will not be an ordinary tanker! Some people might argue that we should buy whey they are trading near support and sell when they are trading near resistance. I am not objecting that, but this time round, I really think that DJI 9759 support is not going to hold on much longer. It is gonna to be broken.

Even though I trades in KLSE, sometimes I do my research based Dow Jones Industrial, S&P 500 and NASDAQ to determine the major trend of KLSE.

I am happy that I finally gains some new experiences in trading in KLSE. I start to buy put warrants. Before this, I never had the chance to do so as the uptrend was intact. The feeling is actually quite cute. Since I have bought put warrants, I am happy when the market drops while I used to be getting worry when the market drops.

For your information, most of the put warrants premiums are not correctly calculated by my online broker. I guess it is wise for us to double confirm the premiums before we trade on these put warrants.

Ok, good luck.

GOon

Read more on "Head and Shoulders Chart Pattern"
http://cathoon.blogspot.com/2010/06/head-and-shoulders-chart-pattern.html

"Dow Jones Industrial forming head and shoulders pattern"
http://cathoon.blogspot.com/2010/06/dow-jones-industrial-forming-head-and.html