DIA is closing on a 130.88 target that closely corresponds to the one we are using for the cash Dow. Let’s plan on shorting there by legging into a put spread, buy-side first. This should not be treated as a bet-the-farm play, but rather as an opportunity to make back the cost of your subscription — and perhaps the cost of the Hidden Pivot Course. Accordingly, we’ll use a stop-loss for the puts, albeit a generous one. Keep in mind that if this vehicle overshoots 130.88 by more than a couple of points, it would be telegraphing further upside to the 133.36 ‘D’ target of a much larger pattern begun in August 2010 from 99.11.
Regarding our trade, I’ll recommend buying four April 128 puts with the underlying trading within 0.15 points of the target. I estimate the puts will be trading for around 2.07 then, but you should follow the bid/asked when the target is approached to get the best possible price. Since we aren’t betting the ranch, mainly because the point ‘B’ here is a bit sausage-y, stop yourself out of the position if the puts trade for 25 cents less than you paid for them. The theroretical risk on this trade would therefore be around $100. ________ UPDATE (March 2, 12:45 a.m. EST): The 130.21 target of a lesser pattern raises the odds that the tradable top we were looking for has already occurred. Accordingly, I’ll be looking for entry an opportunity to initiate the short intraday. We may not be able to get the best price that would have been available, but my goal in any event will be to choose a safe entry point that will put us quickly in-the-black. Any trade that is executed will be signaled via an e-mail alert, an update to the tout and a mention in the chat room. If you are not signed up to receive these alerts, you can do so by clicking on the “My Account” tab and checking the e-mail notification box. _______ FURTHER UPDATE (1:33 p.m. EST): The Diamonds look bound for a retracement low at 128.88, so I’ll suggest holding off on the short until the bounce is in progress. To build up a risk cushion for the eventual short, you can try getting long 400 shares at 128.91 with a 128. 84 stop- loss. ________ AND FINALLY… Cancel the trade. The 128.88 target is still valid in theory, but in practice Friday’s chop rendered it unappetizing. We’ll continue to look for an opportunity to get short.