The Diamonds gapped lower at the bell yesterday, mooting the bullish gambit I’d suggested. Now they appear bound for the 162.77 target shown, and although the pattern itself argues for a precise hit, this is unlikely to provide optimal conditions for bottom-fishing because the target coincides with an obvious structural support a tick above it recorded on April 28. Under the circumstances, any bids should be based on the subtlest of uptrending impulse legs originating within a few ticks of the target. Please note as well that there could be a shorting opportunity at the opening, given the distributive action beneath the 163.97 midpoint pivot in the final hours of Tuesday’s session. Traders inclined to shoot from the hip can try buying near-the-money weekly calls for perhaps 0.42-0.45 with DIA trading within a few cents above or below 162.77. Risk no more than 0.12 on the stop-loss. _______ UPDATE (May 7, 6:30 p.m. ET): The expected bounce came, not from the 162.77 target noted above, but from well above it, a few ticks beneath Monday’s 163.45 low. The breach of that low must have stopped out every bull in town, since the rally that ensued was quite steep. But not especially powerful, since, as you can see, it failed to surpass the ‘external’ peak at 165.17. Since this vehicle has been spasming gratuitously for more than two weeks, I’ll have little to say about what it might do today. However, I’ve labeled several peaks that can be used to leverage any impulse legs that occur in the early going. As always, a bc-type pullback from slightly above any of them could provide the ‘camouflage’ entry opportunity we look for.
