A 327.27 target that has been in play since mid-November can serve as a minimum upside projection. Don’t look for bulls to sprint to the target, given their intricate dance at the 308.23 midpoint Hidden Pivot. However, they ultimately were able to build a base atop the resistance, and this will help conserve energy for the next big push. The pattern is not likely to yield a ‘mechanical’ buying opportunity, since that would require a hellish swoon down to the green line. But we can still look for a handhold using the same tactic on the lesser charts. It will be possible in any case to leverage the target with a call butterfly spread. Specifically, I’ll recommend buying eight Feb 12 325/330/335 call butterflies, bidding 20 cents for them initially. If they don’t come on the first day, we’ll try to leg on the spread, bidding 0.55 initially for eight Feb 12 325/330 call spreads. If we are successful, we’ll complete the butterfly by selling eight 330/335 vertical call spreads. My prices are guesstimates, but we can adjust them as needed in the week ahead. ______ UPDATE (Jan 14, 6:33 p.m. EST): Since price action has been flaccid lately, let’s lower our sights a tad, using p2=317.75 as a minimum upside target for the near term. Also lower the bid for Feb 12 325/330 calls spreads to 0.45, good through Friday. _______ UPDATE (Jan 16): Any fills to report? (Jan 19 update: Evidently not.) _______ UPDATE (Jan 20, 8:08 p.m.): The rally is all but certain to hit p2=317.75, but if it pops through, look for more upside to the 327.27 target given above. The latter would equate to a 1600-point rally in the Dow, while the lower number corresponds to D targets I’ve put out for the Russell 2000/IWM. Here’s the chart. ______ UPDATE (Jan 27, 9:07 p.m.): Bending under the weight of other stock indexes, DIA has turned down from well shy of the 317.75 ‘p2’ target. Because everything is falling synchronously, however, and because today’s selloff was strong enough to hint of a bear’s opening shot, we should take the weakness seriously. If you hold a put position tied in any way to my suggestion above, please let me know in the chat room. ______ UPDATE (Jan 28, 10:16 p.m.): The bounce begun from Wednesday’s 302.10 low is a suspected fake that would have no bearing on my bearish outlook, but we’ll give it another day or two before we start insulting its mother.
DIA – Dow Industrials ETF (Last:305.95)