DIA is on a ‘counterintuitive’ buy signal tripped in the opening minutes of Tuesday’s session. With an upbeat close, the ETF looked like an odds-on bet to reach the 206.83 midpoint Hidden Pivot Wednesday morning. My gut feeling is that the rally’s potential is limited, and that’s why we’re focused on shorting into moderate strength. Accordingly, I’ll recommend bidding 0.68 for four April 21 205 puts, day order. This price should be do-able if DIA rallies hits the red line. I’ve pegged the bid to a trendline that has caught two lows over the last week. I’ve also allowed for the fact that this is a four-day week, shortened by the Good Friday holiday. This means premiums for options expiring the following Friday will begin their death dive Wednesday afternoon, and that’s why you shouldn’t pay up. I’m not suggesting a stop-loss for the puts because I’d rather take them home over the weekend than blow them out for bupkus if DIA ends the day at D=208.71. That’d be another tempting place to get short, so there’s no point in abandoning the position. _______ UPDATE (Apr 12, 8:18 p.m. ET): Two days of feeble price action has further distanced DIA from the 206.83 rally target where we’d hoped to buy some puts. We won’t chase them, but you can still plan to bid them in case DIA surprises on Thursday by rallying to the target. You’ll probably need to raise the bid a smidgen from 0.68, since the options look like they will trade no lower than around 0.75-0.80 unless DIA moves significantly higher.
