DIA – Dow Industrials ETF (Last:280.06)

We hold two synthetic puts — short stock, long Nov 29 280 calls — with a built-in profit of $260 no matter what. Although we harbored no illusions about nailing the Mother of All Tops when we initially purchased eight put options as DIA crested last week pennies from an important rally target at 280.88, it’s surprising how quickly stocks have recouped the moderate selloff that followed.  The Hidden Pivot resistance that repelled bulls has yet to be exceeded, but this seems all but certain to happen soon. Notice how this morning’s opening bar gapped through the 279.88 midpoint pivot of a pattern projecting to 284.37. This implies the rally will not stop until it hits that number. Short there, adding to the existing position only if you’ve caught a piece of the rally. One way to do this would be by way of a ‘mechanical’ buy. The ideal set-up would come on a pullback to the green line, stop 275.38, provided DIA has gone no higher than Monday’s 280.81 peak. _______ UPDATE (Nov 30): Cover the short stock on Monday’s opening, since the position has outlived its usefulness with the Dow Industrials frolicking above a 28,046 target.The imputed profit with DIA at 280.95 would be around $250. _______ UPDATE (Dec 2, 10:00 a.m.): DIA head-faked on the opening before dropping to a so-far low of 280.46. A small profit was the worst you could have done, but there have been no reports in the chat room that would allow me to estimate the amount.