US30 1-Hour Timeframe, 08 February 2024
The US30 on a 1-hour timeframe has moved in a volatile uptrend since the recent low plotted on 18 January. On 2 February, the US30 reached a new all-time high of 38 784.3. This move dethroned the 31 January all-time high at 38 609.2.
Observing the striking resemblances between all-time highs (or any price action closely resembling them) is intriguing. Notably, the all-time high on January 31 (marked as blue 1) and the one on February 2 (marked as blue 2) stand out. Following each of these instances, there was a sharp decline in price action immediately after reaching a new high.
Currently, the market trades at 38 693 and is caught in a range (depicted by a pink square). One can observe this consistent behavior in the US30, where the market forms small trading ranges, followed by solid breakouts, with 90% of the recent breakouts being in line with the predominant uptrend.
The 200- and 100-period simple moving averages confirm the uptrend, with the 100-period SMA above the 200-period SMA. These averages also act as strong dynamic support and resistance levels.
Although the primary trend, and therefore the main bias, is to the upside, we need to be cautious of the fact that a small move to the upside in US30 will likely form a new all-time high, which might be prone to much higher volatility and in many cases a subsequent reversal lower.
When looking at our ATR (Average True Range) Indicator, it seems that the current volatility has been steadily reducing over the past few days, as one can observe right before the 31 January High (marked as blue 1).
After a period of reduced volatility, the market tends to form violent breakouts, as can be seen in the 31 January down candle, which whipped off close to 4 days of gain in a single 1-hour candle.
And all this brings us to today's setup.
We are in an uptrend, which favors a breakout to the upside. This will be our longer-term view, with a target at the next major psychological resistance level, 39000. However, in the short term, we can expect to see some retracement to the downside, either during a breakout or shortly afterward.
The downside target could be the area between the 200 and 100 period SMA. A break below this area will also invalidate an upward bias.
As always, take a good look at the upcoming news and keep the diminishing volatility on the ATR in mind; this does raise flags for a violent breakout once it occurs.
Summary:
- The primary outlook favors an upward trajectory, reflecting a long-term view on the US30 asset.
- Nonetheless, significant reversals are anticipated, particularly with the potential for establishing new all-time highs.
- Confirmation of this expectation comes from the diminishing volatility observed on the Average True Range (ATR).
- The target for an upward breakout is set at 39,000.
- Conversely, the downward breakout target is 38,474.4, or within the range delineated by the 100 and 200-period simple moving averages (SMA).
