Back-to-back rallies on Thursday and Friday eviscerated the 345.22 rally target we’ve been using since late March, but it will face two more obstacles over the near term that are nearly as daunting. The first lies at 347.77 and comes from lowering the point ‘A’ of the original pattern. The second, also a Hidden Pivot resistance, is at 349.89, derived from a much larger pattern begun in October from 261. The latter target can be shorted using out-of-the money puts priced under 0.60 if and when DIA gets to 349.72. This will be akin to catching a speeding bullet, so a tight stop-loss and relatively small bet are advised. ______ UPDATE (May 10, 5:32 p.m.): DaBoyz artfully laid off pounding the Dow to avoid the appearance of a stock market getting schmeissed. The Smart Guys will get creamed on Tuesday if they attempt this dog-and-pony show with the broad averages falling as hard as they did on Monday. Since the bull-trap high early in the session obliterated my 349.89 rally target before things went south, I’ve substituted another pattern furnished by an eagle-eyed Pivoteer, ‘Ovcactus’, in the Trading Room. Its 354.89 target leaves us room to consider ‘mechanically’ bottom-fishing at p2=348.32 (no!); at p=337.36 (maybe); or at x=329.19 (for sure, although we’d only be shooting for a ride back to p). ______ UPDATE (May 13, 12:34 a.m.): The ‘mechanical’ long from x=329.19 is still a go, but be aware that this will require a ‘full monty’ stop-loss just below C=320.62. Monday’s high at 351.09 could be an important one, and that’s why I am not suggesting that a long position acquired at X be held for anything more than a ride up to 337.76. I rate the trade ‘6.8’, implying a 68% chance of getting from x to p — not bad, but not great either. Also, did anyone get short at the top, which only slightly exceeded the 349.89 target I’d drum-rolled. If so, please let me know in the chat room so I can determine whether to provide tracking guidance. In any case, partial profit-taking is in order now. _______ UPDATE (May 13, 6:27 p.m.): We don’t usually initiate ‘mechanical’ positions at p, but in retrospect this one looks like it could work. That implies a rally from p=337.76 not merely to p2+346.32, but to D=354.89 (our original target, given above). I am not recommending the trade if DIA falls anew to p.
DIA – Dow Industrials ETF (Last:340.37)