Life is an emotional roller coaster. When we experience the death of a loved one, we grieve, we console, and we heal. When a child is born, we rejoice and give thanks! And every moment between those extremes, we experience sorrow, pain, anxiety, and depression, as well as excitement, joy, happiness, and gratefulness. Trading is like this too!
When stocks fall and continue a downward trend, we catastrophize and think that our investment will not recover. How will I explain to my loved one that we lost our savings?!
Thankfully, when investing in index ETFs, the market always comes in for support. We just don't know when.
In this UDOW (UDOW 0.00%↑) chart — an ETF that tracks the Dow Jones Index — the green line represents the support line. At this level, there is an implied opportunity that is too good to pass up. What follows is a buying opportunity led by institutional investors, followed by retail investors.
UDOW year-to-date chart with daily intervals
On the flip side, the red line demonstrates a resistance line. At this level, it is implied that UDOW is overvalued; hence, a selloff awaits.
There are two significant factors that influence the support and resistance line for UDOW. One is the macroeconomic factor, which itself is a big category of data points like GDP, unemployment rate, consumer prices, producer prices, and interest rates, to name a few.
The second major factor influencing support and resistance lines for UDOW is how the companies within the Dow Jones Index operate their business. For instance, if Apple (AAPL 0.00%↑), the world's highest-valued company, were to report terrible operational figures, inevitably, many shareholders would sell, sending a ripple effect to the market and causing more fear selling.
Once the market settles, you will see that UDOW will not fall below a specific price level, and this is how we know we've hit the support line.
Conversely, when UDOW hits a price level that it cannot break through, we've hit the resistance line.
It is important to know that both the support and resistance lines are lagging indicators, meaning the information they provide is in hindsight.
Note: Please read this site's 24Hour Journal disclaimer regarding finance and investing information.
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ANALYSIS: Coping with the emotional cycle of UDOW
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Life is an emotional roller coaster. When we experience the death of a loved one, we grieve, we console, and we heal. When a child is born, we rejoice and give thanks! And every moment between those extremes, we experience sorrow, pain, anxiety, and depression, as well as excitement, joy, happiness, and gratefulness. Trading is like this too!
When stocks fall and continue a downward trend, we catastrophize and think that our investment will not recover. How will I explain to my loved one that we lost our savings?!
Thankfully, when investing in index ETFs, the market always comes in for support. We just don't know when.
In this UDOW (UDOW 0.00%↑) chart — an ETF that tracks the Dow Jones Index — the green line represents the support line. At this level, there is an implied opportunity that is too good to pass up. What follows is a buying opportunity led by institutional investors, followed by retail investors.
On the flip side, the red line demonstrates a resistance line. At this level, it is implied that UDOW is overvalued; hence, a selloff awaits.
There are two significant factors that influence the support and resistance line for UDOW. One is the macroeconomic factor, which itself is a big category of data points like GDP, unemployment rate, consumer prices, producer prices, and interest rates, to name a few.
The second major factor influencing support and resistance lines for UDOW is how the companies within the Dow Jones Index operate their business. For instance, if Apple (AAPL 0.00%↑), the world's highest-valued company, were to report terrible operational figures, inevitably, many shareholders would sell, sending a ripple effect to the market and causing more fear selling.
Once the market settles, you will see that UDOW will not fall below a specific price level, and this is how we know we've hit the support line.
Conversely, when UDOW hits a price level that it cannot break through, we've hit the resistance line.
It is important to know that both the support and resistance lines are lagging indicators, meaning the information they provide is in hindsight.
Note: Please read this site's 24Hour Journal disclaimer regarding finance and investing information.