Dow Jones futures eyeing bullish breakout?Sitting in a bullish pennant pattern with RSI and MACD pointing to building bullish momentum, it looks like we may soon see a test of topside resistance in Dow Jones futures, pointing to the potential for a bullish break or bearish reversal that may see the price coil up even further.
Whatever outcome eventuates, we can build a trade setup around it using topside resistance.
Should futures bust higher, consider buying the break with a tight stop below the former resistance level. The preference would be to see the price close above the level before initiating the trade as we saw a reversal take place the last time the level was tested.
The initial trade target would be 40213, the high set that day, with the record high of 40358 the next level after that. If the trade works in your favour, consider raising your stop to entry level, or using a trailing stop if we see the record high give way.
But should futures test resistance without being able to close above, consider selling the failure with a tight stop above the level for protection. Potential trade targets include 39658 and 39193.
From a fundamental perspective, renewed signs of disinflation in the US economy adds to the risk we may see more than one rate cut delivered by the Fed this year.
With activity holding up, at least according to the Atlanta Fed GDPNow estimate, the combination of rate cuts and resilient economic growth is the very definition of a textbook soft landing, an outcome that should benefit more cyclical indices such as the Dow.
DS
