Dow to Reach Next Target of 12,600 in January: Charts

The head and shoulder pattern on the Dow achieved its exact target projections. This was followed by a period of L-shaped consolidation activity. The weekly close above 11,600 was clear evidence the L-shaped consolidation breakout was confirmed. The initial upside target for the breakout was near 12,300. This was calculated by using the projected value of the head and shoulder neckline. A move above this level gave an upside target near 12,600, which was calculated by taking the width of the L-shape consolidation band and projecting it upwards. The lingering influence of the head and shoulder pattern neckline proved more powerful. The retreat from 12,300 was rapid and it has tested support near 11,600. In the longer term this is a sustainable breakout with a target near 12,600. Getting to that target level will be more difficult because of the resistance from the neckline projection. Using the slope of the neckline suggests the 12,600 target is achievable in January 2012. From Darly Guppy.