Prominent market technician Ralph Acampora is growing increasingly concerned about recent moves in the stock market, notably in the Dow Jones Industrial Average.
Acampora, a pioneer in the field of chart-based trading, said that the primary utility of reading charts is a “risk management” function, and what he’s observing currently suggests that the bullish dynamic in equities may be unraveling.
That is particularly the case after the Dow DJIA, on Monday closed below its 200-day moving average for the first time since June 2016, and as key components of the blue-chip benchmark spiraled lower.
“I sell when major support levels are broken…. take a look at Caterpillar as an example…The Dow Industrial broke a near-term support yesterday—this is getting uglier action” he said. Moving averages and other technical patterns can help analysts determine bullish and bearish momentum in an asset.
Bearish action in Caterpillar comes as investors worry that a tit-for-tat global trade spat between the U.S. and trading partners in China, Europe, Canada and Mexico could morph into a full-blow trade war, with the potential to dent global economic growth.
“There are certain areas that are holding up well so…no reason to sell. But as I mentioned, you’ve gotta be very, very selective here,” Acampora said. ‘
Trader Georgi Bozhidarov