The set-up: This is a technical trade as the Dow Jones Industrial Average – and the SPDR Dow Jones Industrial Average ETF (DIA) – corrects back to the trend. This is a re-test of the uptrend support line, which is moving almost right on the 50-day moving-average line, making it a powerful support area.

The chart: 

Beyond the chart showing the strong trend that should bring DIA back to support levels, the Relative Strength Index short-term overbought, which is another factor that should make traders comfortable going short on the reversal here.

The play: This is a swing trade here – I’d guess you’ll be in it anywhere from two to 10 days — where you short the Dow with a stop at its recent high of 22,425, but you have a target of just below 22,200. It’s about 2-1 reward-risk at this point. If it doesn’t work you’ll get stopped out quickly; but I think you’re more likely to experience the reward than the risk on this one.

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Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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