By: Tom Gentile
on March 11th, 2022
A Technical Price Pattern on a Dow Jones Industrial Average ETF, the DIA
An ETF on the Dow Jones Industrial Average is the DIA, aka the Diamonds. It tracks the price and yield performance of the Dow Jones Industrial Average Index, It’s price is basically one, one-hundredth of the price of the Dow.
Instead of trying to pick out which stock of the Dow one wants or at what percentage of their portfolio does one want that stock / or those stocks, one can have exposure to the results of the Dow by investing in the DIA, aka the Diamonds.
But if you know me, you know I am an options trader more so than an investor. I have long-term holdings, but a primary catalyst to my livelihood is that of being an options trader.
I look for technical patterns that repeat themselves and focus on trading options on securities with those patterns to earn money.
Symmetrical Triangle Pattern on DIA
How to Project a Price Move On It
When one sees a triangle pattern like this not matter the underlying security the expectation is that the price will break away from the triangle either in a break out to the upside or a break down lower.
One can wait for the price to come to a point and initiate a straddle or strangle options tread on it, OR one can wait .
For what would one be waiting? For the stock to break away from the triangle in either direction up or down.
If the DIA, (in this example), is breaking out, one can consider going long a Call option (Buy to Open a Call Option), If the DIA is breaking down one can consider going long a Put option (Buy to Open a Put option).
Price Projection on the Pending Move
The way to project where the security, the FIA, will go is to measure the widest width of the triangle and figure out that point amount (or dollar amount) width.
In the chart on the DIA shown I have the ascending support line and the descending resistance line.
The top of the triangle as I see it is 340. The bottom of the triangle as I see it is 322. That’s a price or dollar amount difference of 18 points / dollars.
Whichever the DIA breaks higher from the triangle add 18 points/dollars higher from the price point of the break. Build your long call based on that potential price target.
If the DIA breaks lower from the triangle subtract 18 points / dollars from the price point of the break. Build your long put based on that potential price target.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.