We should want to fade rallies that occur for no good reason, and so I’ll suggest shorting this vehicle tomorrow using the fetching Hidden Pivot target shown, at 174.66. Wednesday’s effusion on Wall Street was triggered by the latest drivel from the Fed, which caused knee-jerk investors and assorted other imbeciles to dive into stocks, even if they thought twice about selling off T-Bonds. The 174.66 target looks good enough for me to suggest foregoing the usual, penny-ante stop-loss. The risk, as far as I’m concerned, lies not in having this hoax run against us to any significant degree, but in missing the trade because the rally has fallen short of the target.
Accordingly, I’ll suggest buying four March 30 174 puts if and when the target is closely approached. I estimate that they would be a great deal for 1.35-1.45 at that time. Traders familiar with my proprietary ‘camouflage’ entry technique should look to short the stock (ETF) with DIA trading anywhere between 174.15 and 174.66. This range allows for the possibility the rally could stall at 174.27, the Hidden Pivot target of an alternative pattern. A ‘camouflage’ entry would use a downtrending abc pattern on the very lesser charts to trigger the trade. As implied above, we should give this speculation a little more room than usual, and that’s why I’ll recommend putting the stop-loss at 174.87. That might not sound like much, but with a pattern as clear as this one, we should expect a tradable top to occur within perhaps 0.03 to 0.05 points of the target. Any more than that would be warning bears to get out of harm’s way by letting a manifestly wacky buying spree run its course. _______ UPDATE (March 17, 6:59 p.m.): The short was stopped out for a small loss, with implications that this vehicle is headed higher. The new target at 177.76 was created by sliding the ‘A’ low shown in the previous chart down a notch. It should be regarded as an odds-on bet if DIA can get past p2=175.40. The target is more closely coincident with the one currently featured in my E-Mini S&P tout.