The Dow Jones Industrial Average has had a very interesting year this year to say the least. In the beginning of the year, the index tanked. However, in February, we saw improvements in the value of the index as oil's price started to head upward, supporting the energy sector. Throughout the year, we've continued to see roller-coaster like activity on the index, keeping it in a clear range. However, I believe that it's possible that the Dow could break through support, leading to heavy declines. Today, we'll talk about why the Dow could break support as well as how binary options traders can take advantage of current trends on the index. So, let's get right to it…
Why The Dow Will Likely Break Support
The Dow Jones Industrial Average has already had a relatively rough year, there's no denying that. The simple fact is that poor economic conditions around the world, mixed with the affects of a strong dollar driving trade downward is causing quite a bit of volatility in the index. However, there's one major factor that may prove to be the straw that broke the camel's back.
In December of 2015, the Federal Reserve made the decision to increase its interest rate for the first time in a long time. At the time, the Fed said that it plans on increasing its rate between 2 and 4 more times throughout the year 2016. While the plan was to increase the rate earlier in the year for the first hike, the Federal Reserve hasn't been able to do so as inflation in the United States simply didn't support a rate hike.
However, recently data became available with regard to US inflation in the month of April. In the month, consumer prices increased by 0.4%. This was the strongest month seen in around 3 years and will likely give the Federal Reserve what it needs in order to increase its interest rate; which is a bad thing for the market. Higher interest rates will likely lead to a higher USD. This will lead to even more hardships with regard to corporate profits from corporate trade. It could also cause consumer spending and new home sales to decline. All of this together will likely send the Dow Jones past the pivotal floor at 15,660.18.
Current Opportunities Around The Dow
The Federal Reserve won't be making any decisions with regard to the interest rate for a few weeks. Nonetheless, the Dow is creating an incredible opportunity for traders at the moment. Look at the chart below.
The Chart above shows what we've seen from the Dow Jones Industrial Average over the past year. As you can see, even with large declines, and large gains, the index is staying in a clear range, and at the moment, the Dow is clearly nearing resistance. Given the uncertainties surrounding the market at the moment, it doesn't make any sense that there would be enough confidence in the market to cause a bullish breakout. Now, look over the past year. When the Dow hit these levels, something happened causing massive declines.
How Binary Options Traders Should Trade The Trends
Strictly speaking from a technical standpoint, it seems as though it's time for binary options traders to start watching for strong put option opportunities on the Dow Jones Industrial Average. Doing so will allow you to follow the downtrends that are so clearly coming, down to the profits!
What Do You Think?
Where do you think the Dow Jones Industrial Average is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of Pixabay]