DIA would make a tempting short if it rallies Thursday to the green line (see inset). That would trip a ‘mechanical’ sell signal at 219.07, and in this instance I’d prefer to do it that way rather than converting the signal to ‘camouflage’. Accordingly, I’ll recommend buying four Sep 29 217 puts with DIA trading 219.03 or higher. A price in the range 1.10-1.15 seems reasonable at the moment, but that is a very rough estimate, and you can probably improve on it by monitor the bid/ask spread for the puts once DIA gets within 0.10 points of 219.07. _______ UPDATE (Aug 7, 5:15 p.m.): A head-fake on the opening bar crested at 218.72, somewhat shy of the target. For Friday, use the strategy that’s detailed above, but expect to pay 0.05-0.15 less for the puts. _______ UPDATE (Sep 10): Let’s give it one more try, shorting this hoax if it gets close to the 218.59 secondary pivot shown in the chart. A price of between 0.85 and 1.00 for the Sep 29 217 puts would be doing well, but I’ll suggest using a (very) lowball bid of 0.90 at the opening bell, then adjusting as the day goes on by diligently monitoring the bid/asked spread for the puts. ________ UPDATE (10:22 p.m.): Index futures are up the equivalent of 115 Dow points at the moment, so let’s use the original instruction: buy Sep 29 217 puts with DIA trading 219.03 or higher. _______ UPDATE (Sep 11, 8:48 a.m,): Cancel the order to buy puts, since DIA is in lunatic mode and will open well above the target. ________ UPDATE (Sep 11, 5:59 p.m.): The rally pattern shown could stall out at p2=220.98, but let’s plan on buying puts if it reaches the 222.73 target shown. Bid for four Sep 29 220 puts with DIA trading 222.62 or higher. You should monitor the option spread as detailed above in order to get a good price.________ UPDATE (Sep 12, 6:06 p.m.): Let’s shift to a higher strike; bidding for four Sep 29 221 puts with DIA trading 222.62 or higher. Make the order good through Wednesday.________ UPDATE (Sep 13, 10:32 p.m. EDT): Zzzzzzzz. Let’s keep trying, good for the rest of the week.
