If DIA pulls back for a couple of days without moving above today’s high (see inset), it could set up the kind of ‘camouflage’ trade that would allow even relative novices to get long using stock or options with risk tightly controlled. The still-developing ABC pattern has an A-B leg that is appealingly subtle because it barely surpassed the visually obvious ‘external’ peak at 179.27 (#2) recorded on May 10. This makes it look like a double top to many traders and chartists, although we and the Elliott Wave guys see it properly as the impulse leg of a rally that promises a tradable follow-through (i.e., C-D) leg. I will signal an entry in the chat room if the pattern develops like the one shown. _______ UPDATE (June 7, 7:06 p.m. EDT): DIA pushed higher before dropping back to close with a modest gain. This will likely have drawn more bullish attention than we should want, although we may still be able to use a ‘conventional’ entry trigger to get long. It would still require two more days of retrenchment, however, to set up the trade. A further possibility would be for the rally to push above yet another ‘external’ peak — specifically, the one at 180.65 recorded on 4/27 (see inset, a new chart). That would make p2=183.51 an odds-on bet to be reached while putting D=186.70 in play as a target for next week.
