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Is the Dow Jones Transportation Average Forming a Bull Flag?
By, Simon Maierhofer
Friday April 10, 2015
The Dow Jones Transportation average has been treading water for over four months. The shape of this consolidation has the potential to be a bull flag, a bullish formation that allows for significantly higher prices. Is it?

The Dow Jones Transportation Average (DJT) has been on fire, since late 2012.

A V-shaped correction, and a prolonged period of sideways trading interrupted the parabolic up trend and there’s been no net gain since September 2014.

Trading action since the November 28 all-time high has been contained by a parallel channel, that looks like a flag.

In fact, the DJT may have formed a bullish flag formation.

A bull flag is described as a consolidation period that interrupts a sharp, almost vertical rally. The consolidation range is defined by a parallel channel with a slant to the down side, and tends to separate two halves of a steep rally.

A break above the upper boundary (around 9,150) would be the first step of a bullish breakout, with a measured up side target around 10,000.

Buying against support (around 8,500) is a low-risk buying opportunity to get in on the ground floor. It’s low-risk because the nearby support level provides a clear point of ruin (stop-loss).

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A break below 8,450 would void the bull flag and allow for much lower prices.

I doubt there’s enough buying power to lift the DJT to 10,000, but trade around 8,500 (or breakout above 9,150) offers some low-risk setups.

The iShares Transportation Average ETF (NYSEArca: IYT) is the most widely traded transportation sector ETF.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

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