Most traders have been caught unaware with the recent downside momentum on the US markets. However, with the market approaching a key level is this a time to panic or a time to get bullish?

With most of reports out on the street turning bearish, I believe from a contrarian approach, we may be on the verge of a sharp upside move.

Historically the month of November presents a good buying opportunity for the Dow Jones. Over the last 10 years, the Dow has rallied from November into January 100% of the time.

The facts remain that technically the index is still in a bearish momentum play. This is due to the index having broken below a Wave 4 which negated further upside moves. Also adding weight to the pressure we still have the Relative Strength Index below its key reference line.

At present we are approaching an area of 12828 – 12802 which is a Fibonacci price confluence area within a Fibonacci time Window of November 9th – 20th. We should allow +/- 2 days which can take us into the end of this week until we see a possible short-term low. If this area is strongly violated then I’m afraid that further downside can take the Dow much lower.

In terms of pattern formations, a bullish ABCD move could result if the 12800 area holds. For the intermediate term, watch closely for the RSI to turn higher and a possible divergence. Other than an ABCD pattern, we must also leave the option open that this could indeed turn into a 5 wave move to the downside.

This week could prove to be an important week as a make or break situation approaches for the Dow.

Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of where he teaches low risk trading strategies and money management.