Dow 20,000


What can this struggle for the Dow Jones Industrial Average to cross the 20,000 mark mean? This is a real life example of a common investing term called “resistance.” Technical traders will tell you that they are constantly reading for levels of resistance and support. Support is a level that serves as a virtual floor for the stock, a price that it struggles to fall below. So if a stock is declining and falls from $100 per share to, say, $50 and holds, $50 is the support. On the other hand, if a stock is rising to $100 but struggles to surpass that point, $100 is the resistance level. Technical traders follow this because once a stock breaks past its resistance (or support), it is likely to go much higher (lower). A hedge fund manager taught me “I don’t trust the markets, but I do trust people’s behavior. People are predictable.” This is what technical traders live buy. So as we have seen the Dow flirt with 20,000 for days, understand that smart money is waiting for that breakout above 20,000. Much of that money is on the table.

-Joe

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