DJIA Composite Key Earnings Level & Trading Range

DJ:DJI   Dow Jones Industrial Average
919 2
Q: What is the "KEY LEVEL" in the Dow Jones Industrial Average and why does it exist?
A: It is the price level where each component of the index REPORTS EARNINGS and its OUTLOOK for the coming quarter.

There are 4 times a year when we KNOW THE MOST about a stock and that is when the company reports its earnings for the most recent quarter and then they provide their outlook for the coming quarter. This is the most important time for analysts, investors and traders to focus on a stock and listen to what the company has to say. The company has to go through a two week "Quiet Period" prior to reporting and anticipation is high. The company then has several weeks of information about the new quarter to help guide expectations for the coming quarter, which gets quickly analyzed and priced into the market.

The way to look at the market is to understand that this process is unfolding and that these "EARNINGS LEVELS" represent "Fair Value" for each company. Once about half of the stocks report earnings , the market has been building time around that level until the end of the quarter and before the new quiet period before the next quarterly reports start.

The YELLOW BOX represents choppy back-and-forth trading around the "composite earnings level" at the end of each quarter.

Earnings season begins again in a couple of weeks, in the middle of October so you can imagine that nerves will be at their most sensitive between now and the start of earnings announcements.

I hope this perspective of the markets gives you a greater understanding for how the market works and potentially you can see the hidden patterns that are here as well. For example: Do you see how the market trades in a tighter range around the KEY LEVEL once it is "set in place"? That is valuable information, if you know how to find it.

If you have any questions, please post them here or join us in the KEY HIDDEN LEVELS chatroom where we discuss this concept and others all day long, every day.


Tim West
9/30/2016 End Of Quarter
Kommentar: 18250 is a magnet for price action. If we get a move away from 18250, it just returns. Here we are again. Keep in mind that earnings season beginning later this week, starting with $JPM.
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The most recent level, 18255, could it be treated as a "true value"? If so, then oversold areas could be bought and oversold could be shorted, exit would be 18255.
17644 acted like that, not as S/R.
timwest xiiimik
I think it does both. I wait for an oversold market to stall and then turn up and I look for it to rally back up to the KEY LEVEL. If it has rallied far enough and has run out of steam as it approaches the Key Level, then I'd consider shorting for a retest of the lows. If the market pushes through the Key Level, then I would look to go with the trade until it gets overbought above the "value" level where I can exit. I would then look to sell short and look for a retest of the Key Level. So, I find it to be much like the standard intraday "Pivot Levels" that traders use. What seems to happen at the end of the quarter is that the Key Earnings Level becomes a strong magnet for the price action as the market participants get nervous ahead of the next quarterly reports.
+2 Antworten
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