DIA

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.

A target at 280.88 allowed us to get short four cents off what could prove to be an important top. An initial position of eight Nov 22 280 puts has yielded a partial profit that effectively reduced the cost basis for the two puts that remained to a $200 CREDIT. Because the options expired on Friday, I suggested rolling the position forward by buying two Nov 29 280 calls while letting the two puts we were long turn into short stock. This effectively gave us two synthetic put options that will provide further gains if DIA continues to fall while limiting our losses if the Dow recovers next week. The $140 we paid for the calls is more than offset by the $400 in theoretical profits booked on the sale of six puts from the original position.

I'm establishing tracking guidance for a short position initiated near Tuesday's 280.84 peak, since the 280.88 target I'd begun drum-rolling two weeks earlier is just too good to waste. Usually I require that at least two subscribers report having done a touted trade before I track it, but I am making an exception this time because it would seem that most of you have all but ceased using these targets, even to buy cheap puts or calls that effectively leverage the targets with entry risk held almost to nothing. Accordingly, I'll assume eight Nov 22 280 puts acquired for 0.77, where they opened (before trading down to 0.73). Half would have been covered for 1.54, leaving four with an effective cost basis of zero. We'll plan on holding them until Friday, when we can roll into the Dec 6 or 13 expiration. Incidentally and for your further guidance, the puts appear bound most immediately for 1.97, a 'D' Hidden Pivot target that is likely to be reached if p=1.53 is decisively exceeded. _______ UPDATE (Nov 20, 2:10 p.m. EST): I have closed out another 25% (i.e., two put contracts) of the position, since the puts have shot up above a 1.97 target mentioned in the Trading Room earlier today. We'll continue to hold two puts for, effectively, a CREDIT of $200 apiece. This guarantees a profit of at least $400, no matter what happens, for each eight contracts purchased initially. We'll still plan on rolling to a further-out expiration date on Friday, swinging for the fences with the contracts that remain.

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.

Today's chart shows a rally target at 263.39 that looks like a strong bet to be achieved, probably within 3-4 days. It is somewhat higher than the corresponding target at 25,998 that I've flagged for the Industrial Average. Although you should monitor the latter for a possible stall, this Hidden Pivot looks more likely to nail the top -- or at least "a" top, since we should be open to the possibility that the stock market will flout a darkening economic picture and continue to rise for no good reason.______ UPDATE (Feb 26, 11:42 p.m.): This is taking too long, but yes, the rally target given above is still valid. _______ UPDATE (Feb 28, 9:54 p.m. EST): It is mildly bearish that DIA has turned down after peaking a point shy of the 263.39 target given above. This vehicle will fall most immediately to 257.69 if sellers crack the 259.06 midpoint support. (Click here for chart.) The target will work for tightly stopped bottom-fishing, but we shouldn't go full-bore because the hidden pivot coincides with a structural low at 257.50 recorded a week ago. If the pivot is hit in the first two hours of the session, use expiring 258 calls to play for an immediate bounce. Notice that a breach of the 257.50 low could set up a 'counterintuitive' buy as well, but its usefulness would depend on when in the session this occurs.

It took buyers nearly five hours of diligent head-butting to get past the 254.06 Hidden Pivot resistance I'd flagged here Friday. The tedium allowed subscribers to savor the put options they'd bought for around 1.20 before DIA fist-pumped its way to a marginal new high that stopped out our short position for a loss of about $84.  I am reluctant to infer that such a feeble short-squeeze could be the beginning of a further push to the 257.09 target shown, but I'd come around if DaBoyz can close this hoax above 254.06 for another day or trade higher than 254.84 intraday. We can try to get on board belatedly via a 'mechanical' set-up if the opportunity arises, so stay tuned to the chat room and Rick's Picks  'Email Notifications' if you care.______UPDATE (August 6, 2:57 p.m.): Today's modest but effortless move higher has shortened the odds of DIA reaching the 257.09 target noted above over the near term. ______ UPDATE (August 8, 8:45 p.m.): DIA's leap to 256.75 earlier in the week brought it to within 0.34 points of the target, but that's not close enough for us to consider it fulfilled. If you've made money being long on the way to 257.09, you can short there aggressively using out-of-the-money puts that expire in 5-12 days. Stop yourself our if they trade for 20% less than you paid. _______ UPDATE (August 12, 5:08 p.m.): Buyers sputtered out at 256.76, a scant 0.33 from my target, causing DIA to fall sharply as the week ended.  The target is still valid in theory, but since we don't usually try to leverage sloppy seconds, I'll suggest backing away from the trade suggested above.

In the list of touts, I am substituting this vehicle for the E-Mini S&Ps because there appears to be almost no interest in the latter in the chat room.  The chart shows a very slight overshoot of a D target at 255.15. Given the perfect clarity of the pattern, even a two-tick overshoot is bullish and implies DIA is bound for the target of an even larger ABC. That would be this one, with a 258.73 objective.  We will trade this vehicle differently from the E-Mini futures, with a nearly 100% emphasis on option trades, since they are the only ones that seem to get noticed in the chat room. A 'conventional' buy signal has been tripped, as implied above, but we'll wait for a mechanical signal before I suggest jumping on board via the purchase of call options. _______ UPDATE (August 3, 12:46 a.m.): There's too much bravado in the FAANG stocks at the moment, so let's plan on fading a go-along rally in this vehicle. Specifically, I'll suggest buying two August 10 254 puts if the underlying gets within 0.05 of the 254.06 target shown in this chart. I estimate the options will be trading for around 1.15-1.20 if the target is reached toward the end of the session. This is a highly speculative bet, since we'll be getting in the path of a speeding freight train, so don't bet the ranch._______ UPDATE (August 3, 1:04 p.m.): As expected, DIA has rallied to a so-far high at 254.12, allowing subscribers to buy puts -- as reported in the chat room -- for 1.17-1.21. For now, I will track two @1.21. Stop yourself out if they trade for less than 1.00.

Friday's big rally doubled the value of our calls, but I am so skeptical about this showy buying binge that I will suggest selling the options at-the-market when stocks begin to trade on Monday. This will likely produce a loss, since subscribers paid as much as 0.85 for the May 18 248s. But don't assume that because they went from 0.24 to 0.48 on Friday that they will continue to ascend at that rate.  Much more likely, unless the broad averages explode to the upside again, is that the options will barely uptick; then they will sink back into oblivion, as options nearly always do when bought against the dominant trend. (Also, did you notice in the chart that DIA became an appealing 'mechanical' short at the green line?) If you want to hold onto the options anyway for what-the-hell reasons, that's okay too. But officially, we'll plan to take our lumps at the opening bell.  Check back here Sunday evening in any case, since it's remotely possible index futures will be doing something crazy-bullish at that time. _______ UPDATE (May 7, 8:12 p.m. EDT): As anticipated, the options blipped briefly in the early going (to a high of 0.90) before relapsing to close at 0.50. Based on reports in the chat room, I'll score the trade as a push.  Losses in any event would have been small.

Our pair of May 18 248 calls came back from the dead with the spirited bounce off Tuesday's bombed-out lows. The options had traded for as much as 1.52 on Monday, although Rick's Picks subscribers, following my instructions, were able to buy them for 0.85 or less toward the end of the day.  But on Tuesday, with the Indoos down more than 350 points, the calls fell to 0.26 before recovering to 0.50 on the close. For now, I'll suggest doing nothing further.  The bounce in DIA is encouraging, but it'll need to surpass the 245.56 peak notched last Thursday on the way down to give our options a fighting chance. _______ UPDATE (May 3, 4:48 p.m.): We sure as heck wouldn't short the May 18 248 calls for the pittance (0.24) quoted at the close. That in itself implies that neither should we despair over the prospect of holding them for a while longer.  They still have two weeks left on them, and anything could happen.  For now, offer half the position (i.e., one option) to close for 1.10, good-till-canceled.