NEW YORK (TheStreet) -- For the last 30 days, the Dow Jones Industrial Average (DIA) was consolidating below the 17,000 figure -- until late last week, just before the Fourth of July holiday. Then the Dow broke through to new highs.
So is this bullish run sustainable?
We note two key points in the daily chart price action. Both support our medium-term bullish view.
1. Resistance levels become support
Observe how the prior all-time highs (at point A, on the left of the chart) at 16,735 became a base of support for the index to push higher (to B, at the middle of the chart).
When resistance becomes support, this is known as a role reversal level. It means that the bulls, which once respected a resistance level, now treat it as a base to push higher.
This is a common formation in long-term trends where new bulls enter the trend, as current longs add to their positions.
2. Weaker rejections
Observe how the price action formed consistent highs at the 17,000 mark (at points 1 and 2 on the above chart). The price action also showed bullish support by forming two HLs (higher lows), with the second leg forming new all-time highs.
Notice how the second rejection (point 2) was a shorter pullback, suggesting that the bearish pressure was weakening over time.
These hints, along with the index's ability to sustain itself above the 17,000 mark, all suggest that the bulls are happy to buy on pullbacks and carry the index higher.
So let's look at some more technical analysis to back up this point.