In Remembrance: Our Friend and Colleague, Kevin Heitschmidt

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It is with a heavy heart I bring you all the news of the passing today of Kevin Heitschmidt. He is / was a friend of mine, my team and our programmers, John, Ray, and Jim.

For those of you that did not know Kevin, know this… you ALL have benefited from him being in your life. He was our Chief Beta Tester of Toms Option Tools. If there was a bug to be found Kevin would find it. Much of what the tools have and do are as a result of Kevin’s direct contributions to its development.

Kevin. Working with you over these last several years has been a privilege. 

Your relentless persistence to making our software top notch, as well as professionalism and attitude have been fantastic to me and the entire team.  

Most people don’t know the kind of impact you have made to our tools and the work we do, and I want you to know how much you are/were valued and appreciated.

Thank you for everything you’ve contributed and for being such a great part of our team. Your legacy will continue to inspire us.

SPDR Dow Jones Industrial Average ETF – DIA aka the “Diamonds“

Last week I referenced the DIA was going through with a parabolic move to the upside. The image above shows what is possible when a security goes parabolic. It can retrace back down to where it broke out from, sometimes just as quick.

Tools and Observations

The Dead Cat Bounce

Please don’t call PETA on me, this is the name of a techincal pattern occurrence that happens on securities where the expectation is for a security to bounce up higher in price after a very sharp sell off. 

The premise is that after a steep enough fall even a dead cat will bounce.

Now that is a macabre visual, I will give you that, but it paints a picture as to what happens or could happen after a steep sell off, (even the one day sell off variety), occurs.

I am just a fan of education you all on what can be done and what I’d encourage you all NOT to do.  Sometimes no trade is the best trade.

I would caution my subscribers away from predicting a Dead Cat bounce scenario.  I’d rather you focus on what can eb considered a variation on that pattern and that is my Volume Spike system, (Bull or Bear) as it brings in volume and a rules based-approach as to how to ascertain a target move expectation and a stop management approach.

Some may look at today as a Dead Cat Bounce opportunity – and if I need to reference this technical pattern again, even I don’t like the sound of the name so I will just use the intials (DCB) when referencing it from here on out.

Without a rules based approach one may look at a day like today on SPY thinking it has to bounce because it fell so hard so fast (today).

I will bring up a chart image for SPY showing it has already dropped pretty far, prety fast days prior to today.

The image will show that maybe it did get a small bounce after a steep drop, but that just set things up for a further drop after a bunch of people jumped back in.

Having to deal with the security continue to drop after this tiny bounce in price is a pain to deal with.  I’d rather for a test of a prior resistance level as a new support or a test of a Fibonacci retracement zone or both happen before moving in on a bullish option trade.

In investing a move like this is considered a ‘sucker’s rally’ and I guess it can be referenced the same for an options trader even though an options trade is done over a much shorter time frame.

1. This price move down over at least 4-trading days might be considered a steep drop or sell off
2. … there was a two-trading day bounce that one might deem is/was a DCB that they would want to trade for a continued higher bounce…
3. … only to realize today this was not a move that was sustainable with the big bearish candle populating on the chart.

One way to have assessed that bounce wasn’t going to last long is the couple of day bounce moved DIA back up to what was a prior ascending support line and possibly testing it as a new resitance area.

Today’s moved was based on earnings in the tech space, namely GOOGL and TSLA not giving investor’s what they wanted so now I / we have to ask ourselves…

Will DIA find support soon?  Or is their further downside to come?

One way I look for potential support is add the Fibonacci retracement tool on to the chart.

I am looking at the 38.2%, 50% or 61.8% Fib levels as possible future support.

Take alook at that image of DIA only this time with the Fib retracement in view:

I can look at this the paast 90-days or 120-days and in either case DIA is currently at or near the 38.2% Fib retracement.

I want to see a move off that level a bit higher before I go rushing in to a bullis option trade.

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