Posted in Technical Analysis
By: Tom Gentile on March 11th, 2022 • 3 mins read
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.