DIA

Yesterday's gap-up opening was in fact the bull-trap we'd expected, and it brought this vehicle to within inches of our 156.01 target. The 155.67 actually achieved wasn't quite close enough to get us short stresslessly, however, and so initiating a position will have to wait until Wednesday (assuming the perfect opportunity arises). Adroit camouflageurs are encouraged to attempt the trade in less-than-perfect circumstances, since this is a high-odds spot for a tradable top to occur. (It's also possible that last Thursday's 155.74 peak was the top we've been looking for. For that reason, you'll need to pay close attention to minor impulse legs in the opening 15 minutes of Wednesday's session, since they could yield the sort of subtle opportunity that comes and goes all too quickly.)

Because of the close proximity of an important rally target in the E-Mini S&Ps, we should view an analogous one at 156.07 in this vehicle as an opportunity to get short with relatively little risk. Accordingly, I'll recommend buying four September 150 puts if and when DIA is trading within 3 cents of the target.  My guess is that the options will be trading for perhaps 1.18-1.24. Please report your fills in the chat room so that I can establish a tracking position for your further guidance. Note as well that my intention is to use a stop-loss 20 cents lower than the amount paid for the puts, on average, by subscribers.  If you use a 'camo' signal to get short, you can double the order size to eight contracts (or 800 shares if stock is used). _______ UPDATE (9:56 a.m. EDT):  I just noticed a compelling target at 156.01, so let's start looking diligently for the short from 155.95 on up.  We'll need to guard against the possibility that today's obligatory, sleazy gap-up opening will turn out to have been a bull trap.

We hold four July 146 puts for 0.79 and are attempting to short four July 142 puts against them for 0.82.  If successful, that would give us a vertical bear spread with a virtually riskless shot at a $1284 payoff. You should adhere to the 0.59 stop-loss on the puts, however, since any rally strong enough to trigger it is likely be the sort of brute we should not want to tangle with. Our loss would be about $100, commissions included.  That's more loosey-goosey than I usually advise when we've got a put position with a profit that we could nail down, but the trade feels like it's worth gambling on. _______ UPDATE (July 2, 12:53 p.m. EDT): This morning's low on the July 146 puts was 0.59, so we exited the position for an $80 trading loss.

The 150.39 rally target shown is a tempting spot to try shorting, since the ABC rally pattern has many characteristics that we like. Accordingly, I'll recommend buying four July 146 puts if DIA trades above 150.35. Stop yourself out if the puts trade for 0.20 less than you paid for them. You could also offer 400 shares short at 150.37, stop 150.47. ________ UPDATE (10:50 a.m.):  Today's comically stupid rally has gotten us filled a hair off the so-far high. For tracking purposes, and based on reports in the chat room, I'll use a 0.79 fill on the puts, implying you should stop yourself out if they trade for 0.59. Our theoretical risk, commissions included, will be about $100. ________ UPDATE (June 28, 11:00 a.m.): Just to have something to shoot for, let me suggest offering four July 142 puts short for 0.82 against the July 146 puts we own for 0.79. Mark the order good-till-canceled.  Sure, this is greedy and overweaningly ambitious. But we are worth it!  My strong gut feeling is that the dumb consumer-spending story that catalyzed Wednesday's feeble short-squeeze is about to be overwhelmed by the hugely more important story that the Fed-engineered 'housing boom' is deader than Kelso's nuts.  In any case, the stop-loss I've advised limits theoretical risk to $100, commissions included.

In the chat room on Friday, I'd informally suggested shorting into whatever rally ended the week. However, with the Dow off 106 points at the close, this tactic would have been flouting DaScumballs' tendency to reverse Friday's polarity on Sunday nights   This they appear to be doing -- on gaseous volume, as is nearly always the case -- but we'll have to wait until Monday morning before we can fade them using puts or calls. Any such opportunity will be unpredictable via a tout disseminated Sunday night, but when the markets open Monday morning, I'd suggest looking to get short at D targets of minor, uptrending abc patterns.  Night owls looking for additional options should check out my tout for the E-Mini S&Ps, since it takes into account the six-point rally that has already occurred.  The chart shows that bears will be shooting for a move down to at least 146.21 once the midpoint support at 149.55 is busted. _______ UPDATE (June 18, 2:25 a.m. EDT):  Three large, gratuitous swings yesterday left DIA the equivalent of 109 Dow points higher. Although the rally top evinced the same chicken-heartedness that I've described in today's GOOG tout, we'll defer to insanity and not try to intercept this vehicle aggressively.  'Camo' shorts are okay at the 'D' targets of minor rallies, but it will be catch-as-catch-can.  Please feel free to query me about any possible opportunities you may have spotted if I'm in the chat room.

The midpoint support of the pattern shown has yet to be breached, but if and when that occurs it will open the sluice gates for a selloff equivalent to about 330 Dow points.  We won't speculate by jumping on put options immediately, since no one ever got rich buying puts based on bearish hunches. Instead, we can wait for a rally and try to short the top by buying puts when a Hidden Pivot target is reached.  Stay close to the chat room, or sign up for intraday alerts on your Account page, if you want to be notified of any such opportunities.  For now, though, we'll wait and see whether the 149.55 midpoint pivot holds. _______ UPDATE (June 14, 2:12 a.m. EDT): The turn came from 149.48 -- within just 0.07 points of the pivot -- so we'll consider it unbreached. From that point forward, and for the remainder of the day, nearly every uptrending abc pattern generated an 'x' entry point that would not have gotten stopped out (see inset, a fresh chart).  Under the circumstances, we should trade with the flow here rather than get aggressively in its way.

Based on a 155.30 rally target disseminated here on May 6, we bought four June 152 puts yesterday for 1.00 with DIA topping at 155.14. Since I advised closing out two of them for 1.14 intraday, we are left with a profit-adjusted position of two puts whose cost basis has been reduced to 0.86. Now, offer an additional put on the opening and hold the remaining put as a lottery ticket. ______ UPDATE (12:25 p.m. EDT):  The puts opened for 2.30, so the sale of one more would leave you with a single put whose costs basis, adjusted for gain so far, is a 1.44 CREDIT. Thus, a profit of $144 is the worst this trade can do no matter what happens to DIA.  For now, do nothing further.  _______ UPDATE (June 3): Offer one June 147 put short for 1.06, good-till-canceled.  If the order fills, we'll have a risk-free lock on a $250 profit no matter what DIA does, and a shot at $750 if stocks fall hard this month.  _______ UPDATE (June 6, 2:29 a.m.): Lower the offer on the short June 147 put to 0.54, day order. Intraday note:  The puts opened for 1.15, so we were able to lock in a $5 spread for a $2.59 CREDIT.  This means that the worst we can do is make $259 on the trade; and the best, with DIA trading 147.00 or lower on June 21, is make $759.

The gap through the 149.23 target implies that DIA is a strong bet at this point to achieve the 155.30 target of the 'extension' pattern at the right-most edge of the chart (A=137.60 on 2/25; B=148.66 on 4/11; and C=144.24 on 4/22). I'll suggest staking out a speculative short if and when DIA gets there by buying four out-of-the-money puts with a June expiration. I'll provide further details if and when the target is closely approached, but at the moment, my Tradestation option grid is kaput. Traders should position from the long side between here and around 153.50. _______ UPDATE (May 22, 11:48 a.m. EDT):  The futures vaulted to an intraday high at 155.14 before selling off sharply. Accordingly, I am going to track four June 152 puts @ 1.00.  For now, tie them to a stop-loss at 0.88 against an order to sell two @ 1.14.

The next rally target with short-able stopping power lies at exactly 155.30, and so I'd suggest buying four July 151 puts if and when this vehicle gets within 7 cents of the target. You should stop yourself out, however, if those puts trade for 0.15 less that what you paid for them.  Above Friday's high your bias should be bullish until the target is reached, since it will become my minimum upside objective above 149.82.