If DIA completes the bullish pattern shown, there’s an implied 300-point rally just ahead. Ordinarily, our focus would be on getting short at the 178.23 target. Although we will be looking to get short somehow, we should allow for the possibility of a top that falls shy of the target. Accordingly, our first order of business will be to get long, the better to build a profit cushion for when we reverse the position. We can do so with a mechanical bid at 175.75, stop 174.92, to be activated once the secondary pivot has been exceeded by at least 0.75 points for three bars. This is what I call a ‘mechanical’ trade, and I will signal it in the chat room and via an email alert if the opportunity develops. If you prefer to use options instead of stock, stick to near-the-money calls with two to three weeks left on them. The rules governing ‘mechanical’ trades are proprietary, but I’ve sketched this one hypothetically so you can get a rough idea of how to proceed.
