DIA opened on a big gap that looked bound for our 263.39 target, but it turned out to be a bull trap. The subsequent relapse tripped a textbook ‘counterintuitive’ short that produced a quick profit, but sellers couldn’t finish the job. The bullish finishing stroke was not very impressive, but it generated a new rally target at 263.63. (3-min, A=257.60 on 2/21). Ordinarily I would advise shorting there only if you’ve made money on the way up. In this case, however, the uptrend has been so treacherous that I’ll recommend a modest short, tightly stopped, at the target. We’ll look at expiring out-of-the-money puts if the trade sets up right. _______ UPDATE (Mar 4, 6:42 p.m.): Today’s plunge negated the rally target and shorting strategy.
